Motion Rollerblades Has Three Product Lines-D,E,and F The Company Is Deciding Whether to Drop Product Line F

question 70

Multiple Choice

Motion Rollerblades has three product lines-D,E,and F.The following information is available: $\begin{array}{|l|l|l|l|} \hline& \text { D } & \text { E } & \text { F } \\\hline \text { Sales revenue } & \$ 90,000 & \$ 50,000 & \$ 31,000 \\\hline \text { Variable costs } & (40,000) & \$ 15,000 & \$ 12,000) \\\hline \text { Contribution margin } & \$ 50,000 & \$ 35,000 & \$ 19,000 \\\hline \text { Fixed costs } & (15,000) & \$ 10,000 & ( 23,000) \\\hline \text { Operating income (loss) } & \$ 35,000 & \$ 25,000 & \$(4000) \\\hline\end{array}$ The company is deciding whether to drop product line F because it has an operating loss.Assuming fixed costs are unavoidable,if Motion drops product line F and does not replace it,what effect will this have on operating income?

• A) Operating income will increase $4000.
• B) Operating income will increase $19,000.
• C) Operating income will increase $23,000.
• D) Operating income will decrease $19,000.

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Definitions:

Abu Simbel

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A prominent pharaoh of Egypt's Nineteenth Dynasty, renowned for his architectural achievements and military victories, ruling from 1279-1213 BCE.

Amarna Period

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