Boots Plus has two product lines: Hiking boots and Fashion boots.Income statement data for the most recent year follow:

Assuming the Fashion line is discontinued,total fixed costs remain unchanged,and the space formerly used to produce the line is rented for $30,000 per year,how will operating income be affected?

Question

Boots Plus has two product lines: Hiking boots and Fashion boots.Income statement data for the most recent year follow:

Assuming the Fashion line is discontinued,total fixed costs remain unchanged,and the space formerly used to produce the line is rented for $30,000 per year,how will operating income be affected?

Quizplus · Accepted Answer

C)
Sales Revenue 340,000
Plus Additional Revenue 30,000
Total Revenue 370,000
Less Variable Expenses (235,000)
Contribution Margin 135,000
Less Fixed Expenses (76,000)
New Net OI 59,000
Less original OI (49,000)
Increase in OI $10,000

Boots Plus Has Two Product Lines: Hiking Boots and Fashion