Faros Hats Inc.has two product lines-baseball helmets and football helmets.The income statement data for the most recent year is as follows:
- Assuming the Football Helmets line is dropped,total fixed costs remain unchanged,and the space formerly used to produce the line is rented for $100,000 per year,how will operating income be affected?

Question

Faros Hats Inc.has two product lines-baseball helmets and football helmets.The income statement data for the most recent year is as follows: 
- Assuming the Football Helmets line is dropped,total fixed costs remain unchanged,and the space formerly used to produce the line is rented for $100,000 per year,how will operating income be affected?

Quizplus · Accepted Answer

The operating income will increase by $30,000 because the rental income of $100,000 will be added to the operating income, assuming no other changes in costs or revenues.