Contribution Margin Income Statement Data for the Most Recent Year

question 67

Multiple Choice

Contribution margin income statement data for the most recent year follow: $$\begin{array} { | l | r | r | r | } \hline & \text { Total } & \text { Adult jackets } & \text { Children's jackets } \\\hline \text { Sales revenue } & \$ 365,000 & \$ 275,000 & \$ 90,000 \\\hline \text { Variable expenses } & \$ 205,000 & \$ 165,000 & \$ 40,000 \\\hline \text { Contribution margan } & \$ 160,000 & \$ 110,000 & \$ 50,000 \\\hline \text { Fixed expenses } & \$ 102,000 & \$ 50,000 & \$ 52,000 \\\hline \text { Operating incame (loss) } & \$ 58,000 & \$ 60,000 & \$ ( 2,000 ) \\\hline\end{array}$$
- Assuming the children's jackets line is dropped,total fixed costs remain unchanged,and the space formerly used to produce the children's jackets line is used to double the production of adult jackets,how will operating income be affected?

• A)Increase $176,000
• B)Increase $60,000
• C)Increase $118,000
• D)Decrease $60,000

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Definitions:

Upward Communication

Messages sent from the lower levels of the organizational hierarchy to the higher levels.

Lower Levels

Refers to the subordinate or base layers within a hierarchical structure or system.

Organizational Hierarchy

The arrangement of individuals within an organization into different levels of authority and segments based on job function or department.

Upward Communication

The flow of information from lower levels of a hierarchy to higher levels.