The income statement for Sweet Dreams Company is divided by its two product lines, blankets and pillows, as follows:
Sweet Dreams should eliminate the pillows product line only, if by doing so, they can eliminate more than $60,000 of fixed costs.

Question

The income statement for Sweet Dreams Company is divided by its two product lines, blankets and pillows, as follows:
  Sweet Dreams should eliminate the pillows product line only, if by doing so, they can eliminate more than $60,000 of fixed costs.

Quizplus · Accepted Answer

If the fixed costs associated with the pillows product line are greater than $60,000, then eliminating the product line would result in a net decrease in costs for the company. However, if the fixed costs associated with the pillows product line are less than $60,000, then eliminating the product line would result in a net increase in costs. Since the income statement does not provide information on the fixed costs of the product lines, we cannot determine whether Sweet Dreams should eliminate the pillows product line based on this information alone.

The Income Statement for Sweet Dreams Company Is Divided by Its