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Shine Bright Company Has Three Product Lines: D, E, and F

Question 41

Multiple Choice

Shine Bright Company has three product lines: D, E, and F. The following information is available:
DEF Sales $60,000$38,000$26,000 Variable costs 36,00018,00012,000 Contribution margin 24,00020,00014,000 Fixed expenses 12,00015,00016,000 Operating income (loss)  $12,000$5,000$(2,000) \begin{array} { | l | r | r | r | } \hline & \mathbf { D } & \mathbf { E } & \mathbf { F } \\\hline \text { Sales } & \$ 60,000 & \$ 38,000 & \$ 26,000 \\\hline \text { Variable costs } & 36,000 & 18,000 & 12,000 \\\hline \text { Contribution margin } & 24,000 & 20,000 & 14,000 \\\hline \text { Fixed expenses } & \underline { 12,000 } & \underline { 15,000 } & 16,000 \\\hline \text { Operating income (loss) } & \$ 12,000 & \$ 5,000 & \$ ( 2,000 ) \\\hline\end{array} Shine Bright Company is thinking of dropping product line F because it is reporting an operating loss. Assume Shine Bright Company is able to increase the sales of product F to $30,000 with no change in volume of units sold and no change in variable costs or fixed costs. What effect will this have on operating income?


A) Increase $2,000
B) Increase $4,000
C) Decrease $2,000
D) Decrease $4,000

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