Question

The company is deciding whether to drop product line F because it has an operating loss. Assuming fixed costs are​ unavoidable, if Karlson drops product line F and rents the space formerly used to produce product F for per​ year, total operating income will be

Answer 1

Answer:

$65,000

Explanation:

a lot of information is missing, so I looked at a similar question to fill in the blanks:

                                         product D      product E      product F

Sales revenue                   $90,000        $50,000       $30,000

Variable costs                   (40,000 )        (10,000 )        (11,000 )

Contribution margin         $50,000        $40,000        $19,000

Fixed costs                        (10,000 )        (10,000 )       (24,000 )

Operating income (loss)   $40,000        $30,000       ($5,000 )

product F's facilities can be rented for $19,000

net unavoidable fixed costs = $19,000 - $24,000 = ($5,000)

                                         product D      product E      product F

Sales revenue                   $90,000        $50,000        

Variable costs                   (40,000 )        (10,000 )        

Contribution margin         $50,000        $40,000        

Fixed costs                        (10,000 )        (10,000 )      

Operating income (loss)   $40,000        $30,000       ($5,000 )

total income = $40,000 + $30,000 - $5,000 = $65,000

Answer 2

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