Crash Sports,Inc If $50,000 of Fixed Costs Will Be Eliminated by Dropping

question 149

Multiple Choice

Crash Sports,Inc.has two product lines-batting helmets and football helmets.The income statement data for the most recent year is as follows: $\begin{array}{|l|r|r|r|} \hline& \text { Total } & \text { Batting Helmets } & \text { Football Helmets } \\\hline \text { Sales revenue } & \$ 1,050,000 & \$ 700,000 & \$ 350,000 \\\hline \text { Variable costs } & (530,000 & (250,000 & (280,000 \\\hline \text { Contribution margin } & \$ 520,000 & \$ 450,000 & \$ 70,000 \\\hline \text { Fixed costs } & (170,000 & \$(80,000 & (90,000 \\\hline \text { Operating income (loss) } & \$ 350,000 & \$ 370,000 & \$(20,000) \\\hline\end{array}$ If $50,000 of fixed costs will be eliminated by dropping the football helmets line,how will dropping football helmets affect operating income of the company?

• A) Operating income will increase by $50,000.
• B) Operating income will increase by $70,000.
• C) Operating income will decrease by $90,000.
• D) Operating income will decrease by $20,000.

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