Leonora Industries manufactures light fixtures for home,retail,and industrial customers.The retail line has been showing losses for several years,and management is considering dropping the line.Recent income statements have been very similar to the following information which was prepared for the most recent year:
$$\begin{array}{lrrrr}
& \underline{\text{Home}} & \underline{\text{Retail}} & \underline{\text{Industrial}} & \underline{\text{Total}} \
\text{Sales} & \$550,000 & \$320,000 & \$830,000 & \$1,700,000 \
\text{Variable costs} & \underline{357,500} & \underline{217,600} & \underline{680,600} & \underline{1,255,700} \
\text{Contribution margin} & 192,500 & 102,400 & 149,400 & 444,300 \
\text{Fixed costs} & \underline{125,000} & \underline{130,000} & \underline{115,000} & \underline{370,000} \
\text{Operating income} & \$67,500 & \$27,600 & \$34,400 & \$74,300 \
\end{array}$$ Of the fixed costs,$315,000 is common costs that have been allocated equally to each product line.What will total operating income be if Leonora drops the retail line?

Question

Leonora Industries manufactures light fixtures for home,retail,and industrial customers.The retail line has been showing losses for several years,and management is considering dropping the line.Recent income statements have been very similar to the following information which was prepared for the most recent year:
 $$\begin{array}{lrrrr} 
 & \underline{\text{Home}} & \underline{\text{Retail}} & \underline{\text{Industrial}} & \underline{\text{Total}} \
\text{Sales} & \$550,000 & \$320,000 & \$830,000 & \$1,700,000 \
\text{Variable costs} & \underline{357,500} & \underline{217,600} & \underline{680,600} & \underline{1,255,700} \
\text{Contribution margin} & 192,500 & 102,400 & 149,400 & 444,300 \
\text{Fixed costs} & \underline{125,000} & \underline{130,000} & \underline{115,000} & \underline{370,000} \
\text{Operating income} & \$67,500 & \$27,600 & \$34,400 & \$74,300 \
\end{array}$$ Of the fixed costs,$315,000 is common costs that have been allocated equally to each product line.What will total operating income be if Leonora drops the retail line?

Quizplus · Accepted Answer

The Answer of Leonora Industries manufactures light fixtures for home,retail,and industrial customers.The retail line has been showing losses for several years,and management is considering dropping the line.Recent income statements have been very similar to the following information which was prepared for the most recent year:
 $$\begin{array}{lrrrr} 
 & \underline{\text{Home}} & \underline{\text{Retail}} & \underline{\text{Industrial}} & \underline{\text{Total}} \
\text{Sales} & \$550,000 & \$320,000 & \$830,000 & \$1,700,000 \
\text{Variable costs} & \underline{357,500} & \underline{217,600} & \underline{680,600} & \underline{1,255,700} \
\text{Contribution margin} & 192,500 & 102,400 & 149,400 & 444,300 \
\text{Fixed costs} & \underline{125,000} & \underline{130,000} & \underline{115,000} & \underline{370,000} \
\text{Operating income} & \$67,500 & \$27,600 & \$34,400 & \$74,300 \
\end{array}$$ Of the fixed costs,$315,000 is common costs that have been allocated equally to each product line.What will total operating income be if Leonora drops the retail line?

Leonora Industries Manufactures Light Fixtures for Home,retail,and Industrial Customers Of the Fixed Costs,$315,000 Is Common Costs That Have Been