Answer:
Increase in Net Operating Income = $3,000
Explanation:
Provided Current Operating income
D = $45,000
E = $15,000
F = ($5,000)
Total operating Income = $55,000
In case product f is dropped then fixed cost of $21,000 will not be incurred.
Total fixed cost of Product F = $23,000
Avoidable fixed cost = $21,000
Fixed cost still to be incurred = $23,000 - $21,000 = $2,000
Net operating Income will arise same for Product D and E, there will be additional fixed cost of $2,000 without product F
Net Operating Income will be
D = $45,000
Add: E = $15,000
Operating Income = $60,000
Less: Fixed Cost = -$2,000
Net Operating Income = $58,000 after dropping product F
Less: Net operating income with product F = $55,000
Increase in Net Operating Income = $3,000
