Question

Armor​ Sports, Inc. has two product lineslong dashbatting helmets and football helmets. The income statement data for the most recent year is as​ follows: Total Batting Helmets Football Helmets Sales revenue $ 840 comma 000 $ 500 comma 000 $ 340 comma 000 Variable costs ​(530 comma 000​) ​(250 comma 000​) ​(280 comma 000​) Contribution margin $ 310 comma 000 $ 250 comma 000 $ 60 comma 000 Fixed costs ​(200 comma 000​) ​(90 comma 000​) ​(110 comma 000​) Operating income​ (loss) $ 110 comma 000 $ 160 comma 000 ​$(50 comma 000​) What is the effect of dropping football helmets line on the operating income of the​ company? (Assume that fixed costs remain unchanged and that there would be no adverse effect on other​ sales.)
A.Operating income will increase by​ $40,000.B.Operating income will increase by​ $90,000.C.Operating income will decrease by​ $60,000.D.Operating income will decrease by​ $350,000.

Answer 1

Answer:

The correct answer is C.

Explanation:

Giving the following information:

Football Helmets

Sales revenue $ 340,000

Variable costs ​(280,000​)

Contribution margin $ 60,000

Fixed costs ​(110,000​)

Operating income​ (loss) ​$(50,000​)

Effect on income=  fixed costs - operating income= -110,000 + 50,000= - 60,000