The income statement for Bedtime Company is divided by its two product lines,blankets and pillows,as follows: $$\begin{array} { | l | r | r | r | }
\hline & { \text { Blankets } } & \text { Pillows } & \text { Total } \
\hline \text { Sales revenue } & \$ 620,000 & \$ 300,000 & \$ 920,000 \
\hline \text { Variable costs } & ( 445,000 ) & ( 240,000 ) & ( 685,000 ) \
\hline \text { Contribution margin } & \$ 175,000 & \$ 60,000 & \$ 235,000 \
\hline \text { Fixed costs } & ( 75,000 & \underline { ( 76,000 ) } & \underline { ( 151,000 ) } \
\hline \text { Operating income (loss) } & \$ 100,000 & \$ ( 16,000 ) & \$ \$ 84,000 \
\hline
\end{array}$$ Bedtime is considering eliminating the pillows product line.If this line is eliminated,Bedtime will be able to eliminate $73,000 of total fixed costs.How would this business decision impact operating income?

Question

The income statement for Bedtime Company is divided by its two product lines,blankets and pillows,as follows: $$\begin{array} { | l | r | r | r | } 
\hline & { \text { Blankets } } & \text { Pillows } & \text { Total } \
\hline \text { Sales revenue } & \$ 620,000 & \$ 300,000 & \$ 920,000 \
\hline \text { Variable costs } & ( 445,000 ) & ( 240,000 ) & ( 685,000 ) \
\hline \text { Contribution margin } & \$ 175,000 & \$ 60,000 & \$ 235,000 \
\hline \text { Fixed costs } & ( 75,000 & \underline { ( 76,000 ) } & \underline { ( 151,000 ) } \
\hline \text { Operating income (loss) } & \$ 100,000 & \$ ( 16,000 ) & \$ \$ 84,000 \
\hline
\end{array}$$ Bedtime is considering eliminating the pillows product line.If this line is eliminated,Bedtime will be able to eliminate $73,000 of total fixed costs.How would this business decision impact operating income?

Quizplus · Accepted Answer

The Answer of The income statement for Bedtime Company is divided by its two product lines,blankets and pillows,as follows: $$\begin{array} { | l | r | r | r | } 
\hline & { \text { Blankets } } & \text { Pillows } & \text { Total } \
\hline \text { Sales revenue } & \$ 620,000 & \$ 300,000 & \$ 920,000 \
\hline \text { Variable costs } & ( 445,000 ) & ( 240,000 ) & ( 685,000 ) \
\hline \text { Contribution margin } & \$ 175,000 & \$ 60,000 & \$ 235,000 \
\hline \text { Fixed costs } & ( 75,000 & \underline { ( 76,000 ) } & \underline { ( 151,000 ) } \
\hline \text { Operating income (loss) } & \$ 100,000 & \$ ( 16,000 ) & \$ \$ 84,000 \
\hline
\end{array}$$ Bedtime is considering eliminating the pillows product line.If this line is eliminated,Bedtime will be able to eliminate $73,000 of total fixed costs.How would this business decision impact operating income?

The Income Statement for Bedtime Company Is Divided by Its