Protector,Inc Assuming the Football Helmets Line Is Dropped,total Fixed Costs Remain

question 110

Multiple Choice

Protector,Inc.has two product lines-batting helmets and football helmets.The income statement data for the most recent year is as follows: $\begin{array}{|l|r|r|r|} \hline& \text { Total } & \text { Batting Helmets } & \text { Football Helmets } \\\hline \text { Sales revenue } & \$ 840,000 & \$ 500,000 & \$ 340,000 \\\hline \text { Variable costs } & (480,000 & (200,000 & (280,000 \\\hline \text { Contribution margin } & \$ 360,000 & \$ 300,000 & \$ 60,000 \\\hline \text { Fixed costs } & (170,000 & \$(80,000 & (90,000 \\\hline \text { Operating income }(\text { loss }) & \$ 190,000 & \$ 220,000 & \$(30,000) \\\hline\end{array}$ Assuming the football helmets line is dropped,total fixed costs remain unchanged,and the space formerly used to produce the line is rented for $100,000 per year,how will operating income be affected?

• A) Operating income will increase by $40,000.
• B) Operating income will increase by $60,000.
• C) Operating income will decrease by $60,000.
• D) Operating income will decrease by $40,000.

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Definitions:

Doctrine of Constructive Eviction

A legal concept where a tenant is essentially forced to leave their rental property because the landlord has failed to keep the premises livable.

Vacate the Premises

To leave a property, making it available for others to occupy or use.

Make Repairs

The process of fixing or restoring something to its original state or to working condition.

Sublease

A transfer of some but not all of a tenant’s remaining right to possess property under a lease.