Solved

Faros Hats, Etc Assuming Fixed Costs Remain Unchanged, and That There Would Be

Question 78

Multiple Choice

Faros Hats, Etc. has two product lines-baseball helmets and football helmets. Income statement data for the most recent year follow:  Total  Baseball Helmets  Football Helmets  Sales revenue $850,000$500,000$350,000 Variable expenses (530,000(250,000(280,000 Contribution margin $320,000$250,000$70,000 Fixed expenses (180,000(90,000) (90,000 Operating income (loss)  $140,000$160,000$(20,000\begin{array}{|l|r|r|r|} \hline&{\text { Total }} & \text { Baseball Helmets } & \text { Football Helmets } \\\hline \text { Sales revenue } & \$ 850,000 & \$ 500,000 & \$ 350,000 \\\hline \text { Variable expenses } & (530,000 & (250,000 & (280,000 \\\hline \text { Contribution margin } & \$ 320,000 & \$ 250,000 & \$ 70,000 \\\hline \text { Fixed expenses } & (180,000 & (90,000) & (90,000 \\\hline \text { Operating income (loss) } & \$ 140,000 & \$ 160,000 & \$(20,000 \\\hline\end{array} Assuming fixed costs remain unchanged, and that there would be no adverse effect on other sales. What will be the effect of dropping Football Helmets line on the operating income of the company?


A) Operating income will increase by $20,000.
B) Operating income will increase by $90,000.
C) Operating income will decrease by $70,000.
D) Operating income will decrease by $350,000.

Correct Answer:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Unlock this Answer For Free Now!

View this answer and more for free by performing one of the following actions

qr-code

Scan the QR code to install the App and get 2 free unlocks

upload documents

Unlock quizzes for free by uploading documents