Macaulay Roller Skates Company has three product lines-D,E,and F.The following information is available:
- The company is thinking of dropping product line F because it is showing an operating loss.Assuming fixed costs are unavoidable,if Macaulay drops product line F and does not replace it,what effect will this have on operating income?

Question

Macaulay Roller Skates Company has three product lines-D,E,and F.The following information is available: 
- The company is thinking of dropping product line F because it is showing an operating loss.Assuming fixed costs are unavoidable,if Macaulay drops product line F and does not replace it,what effect will this have on operating income?

Quizplus · Accepted Answer

If fixed costs are unavoidable and product line F is dropped, the operating income will decrease by the amount of the operating loss that product line F was incurring, which is $20,000.

Macaulay Roller Skates Company Has Three Product Lines-D,E,and F