Sports Hats, Etc. has two product lines: baseball helmets and football helmets. Income statement data for the most recent year follow:

-Assuming fixed costs remain unchanged how would dropping the Football Helmets line affect operating income?

Question

Sports Hats, Etc. has two product lines: baseball helmets and football helmets. Income statement data for the most recent year follow:
 
-Assuming fixed costs remain unchanged how would dropping the Football Helmets line affect operating income?

Quizplus · Accepted Answer

Dropping the Football Helmets line would decrease operating income by $30,000 because the contribution margin lost from not selling the helmets would no longer be available to cover fixed costs, assuming those remain unchanged.