Westfall Watches has two product lines: Luxury watches and Sporty watches.Income statement data for the most recent year follow:

If $20,000 of fixed costs will be eliminated by discontinuing the Sporty line,how will operating income be affected?

Question

Westfall Watches has two product lines: Luxury watches and Sporty watches.Income statement data for the most recent year follow:

If $20,000 of fixed costs will be eliminated by discontinuing the Sporty line,how will operating income be affected?

Quizplus · Accepted Answer

B)
Contribution Margin $125,000
Less Fixed Expenses 56,000
New Net income 69,000
Less original OI 59,000
Increase in OI $10,000

Westfall Watches Has Two Product Lines: Luxury Watches and Sporty