Momentum Rollerblades has three product lines-D,E,and F.The following information is available: $$\begin{array} { | l | l | r | r | }
\hline & { \text { D } } & \text { E } & \text { F } \
\hline \text { Sales revenue } & \$ 70,000 & \$ 40,000 & \$ 31,000 \\
\hline \text { Variable costs } & \underline { ( 20,000 } & \underline { ( 5000 } ) & \underline { ( 11,000 } ) \\
\hline \text { Contribution margin } & \$ 50,000 & \$ 35,000 & \$ 20,000 \\
\hline \text { Fixed costs } & \underline { ( 10,000 } & \underline { ( 15,000 } ) & \underline { ( 24,000 } ) \\
\hline \text { Operating income (loss) } & \underline { \$ 40,000} & \underline { \$ 20,000} & \underline { \$ ( 4000 )} \\
\hline
\end{array}$$ The company is deciding whether to drop product line F because it has an operating loss.Assume that $22,000 of total fixed costs could be eliminated by dropping F.What effect would this decision have on operating income?

Question

Momentum Rollerblades has three product lines-D,E,and F.The following information is available: $$\begin{array} { | l | l | r | r | } 
\hline & { \text { D } } & \text { E } & \text { F } \
\hline \text { Sales revenue } & \$ 70,000 & \$ 40,000 & \$ 31,000 \\
\hline \text { Variable costs } & \underline { ( 20,000 } & \underline { ( 5000 } ) & \underline { ( 11,000 } ) \\
\hline \text { Contribution margin } & \$ 50,000 & \$ 35,000 & \$ 20,000 \\
\hline \text { Fixed costs } & \underline { ( 10,000 } & \underline { ( 15,000 } ) & \underline { ( 24,000 } ) \\
\hline \text { Operating income (loss) } & \underline { \$ 40,000} & \underline { \$ 20,000} & \underline { \$ ( 4000 )} \\
\hline
\end{array}$$ The company is deciding whether to drop product line F because it has an operating loss.Assume that $22,000 of total fixed costs could be eliminated by dropping F.What effect would this decision have on operating income?

Quizplus · Accepted Answer

The Answer of Momentum Rollerblades has three product lines-D,E,and F.The following information is available: $$\begin{array} { | l | l | r | r | } 
\hline & { \text { D } } & \text { E } & \text { F } \
\hline \text { Sales revenue } & \$ 70,000 & \$ 40,000 & \$ 31,000 \\
\hline \text { Variable costs } & \underline { ( 20,000 } & \underline { ( 5000 } ) & \underline { ( 11,000 } ) \\
\hline \text { Contribution margin } & \$ 50,000 & \$ 35,000 & \$ 20,000 \\
\hline \text { Fixed costs } & \underline { ( 10,000 } & \underline { ( 15,000 } ) & \underline { ( 24,000 } ) \\
\hline \text { Operating income (loss) } & \underline { \$ 40,000} & \underline { \$ 20,000} & \underline { \$ ( 4000 )} \\
\hline
\end{array}$$ The company is deciding whether to drop product line F because it has an operating loss.Assume that $22,000 of total fixed costs could be eliminated by dropping F.What effect would this decision have on operating income?

Momentum Rollerblades Has Three Product Lines-D,E,and F The Company Is Deciding Whether to Drop Product Line F