Head Bucket,Inc Assuming the Football Helmet Line Is Dropped,total Fixed Costs Remain

question 103

Multiple Choice

Head Bucket,Inc.has two product lines-batting helmets and football helmets.The income statement data for the most recent year is as follows: $\begin{array}{|l|r|r|r|}\hline &\text { Total } & \text { Batting Helmets } & \text { Football Helmets } \\\hline \text { Sales revenue } & \$ 840,000 & \$ 500,000 & \$ 340,000 \\\hline \text { Variable costs } & \underline{(440,000) } & \underline{(150,000) } & \underline{(290,000) }_{} \\\hline \text { Contribution margin } & \$ 400,000 & \$ 350,000 & \$ 50,000 \\\hline \text { Fixed costs } & \underline{(162,000) } & \underline{(70,000) } & \underline{(92,000) }_{} \\\hline \text { Operating income (loss) } & \underline{\$ 238,000} & \underline{\$ 280,000} & \underline{\$(42,000) }_{_{}} \\\hline\end{array}$ Assuming the football helmet line is dropped,total fixed costs remain unchanged,and the space formerly used to produce the football helmet line is used to double the production of batting helmets,operating income will be ________.

• A)$350,000
• B)$162,000
• C)$538,000
• D)$280,000

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Definitions:

Net Domestic Product

Measures the total value of all goods and services produced within a country's borders in a specific period, after accounting for depreciation.

Depreciation

A reduction in the value of an asset over time, often due to wear and tear or obsolescence.

Investment

The act of allocating resources, usually money, into something to earn income or gain profits.

GDP Deflator

A scale for assessing the cost of all newly manufactured, domestic final goods and services in a country's economy.