The income statement for Slumber Company is divided by its two product lines,blankets and pillows,as follows: $\begin{array}{|l|r|r|c|}
\hline& \text { Blankets } & \text { Pillows } & \text { Total } \
\hline \text { Sales revenue } & \$ 620,000 & \$ 300,000 & \$ 920,000 \
\hline \text { Variable costs } & (455,000) & (241,000 & (696,000) \\hline \text { Contribution margin } & \$ 165,000 & \$ 59,000 & \$ 224,000 \
\hline \text { Fixed costs } & (74,000) & (74,000) & (148,000) \
\hline \text { Operating income (loss) } & \$ 91,000 & \$(15,000 & \$ 76,000 \
\hline
\end{array}$ Slumber is considering eliminating the pillows product line.If this line is eliminated,Slumber will be able to eliminate $74,000 of total fixed costs.How would this business decision impact operating income?

Question

The income statement for Slumber Company is divided by its two product lines,blankets and pillows,as follows: $\begin{array}{|l|r|r|c|} 
\hline& \text { Blankets } & \text { Pillows } & \text { Total } \
\hline \text { Sales revenue } & \$ 620,000 & \$ 300,000 & \$ 920,000 \
\hline \text { Variable costs } & (455,000) & (241,000 & (696,000) \\hline \text { Contribution margin } & \$ 165,000 & \$ 59,000 & \$ 224,000 \
\hline \text { Fixed costs } & (74,000) & (74,000) & (148,000) \
\hline \text { Operating income (loss) } & \$ 91,000 & \$(15,000 & \$ 76,000 \
\hline
\end{array}$ Slumber is considering eliminating the pillows product line.If this line is eliminated,Slumber will be able to eliminate $74,000 of total fixed costs.How would this business decision impact operating income?

Quizplus · Accepted Answer

The Answer of The income statement for Slumber Company is divided by its two product lines,blankets and pillows,as follows: $\begin{array}{|l|r|r|c|} 
\hline& \text { Blankets } & \text { Pillows } & \text { Total } \
\hline \text { Sales revenue } & \$ 620,000 & \$ 300,000 & \$ 920,000 \
\hline \text { Variable costs } & (455,000) & (241,000 & (696,000) \\hline \text { Contribution margin } & \$ 165,000 & \$ 59,000 & \$ 224,000 \
\hline \text { Fixed costs } & (74,000) & (74,000) & (148,000) \
\hline \text { Operating income (loss) } & \$ 91,000 & \$(15,000 & \$ 76,000 \
\hline
\end{array}$ Slumber is considering eliminating the pillows product line.If this line is eliminated,Slumber will be able to eliminate $74,000 of total fixed costs.How would this business decision impact operating income?

The Income Statement for Slumber Company Is Divided by Its