Darren Company Has Three Product Lines: D,E,and F the Following

question 32

Multiple Choice

Darren Company has three product lines: D,E,and F The following information is
available:
$\begin{array} { | l | c c | c |} \hline & \text { D } & \text { E } & \text { F } \\\hline \text { Sales revenue } & \$ 70,000 & \$ 40,000 & \$ 28,000 \\\hline \text { Variable expenses } & \$ 40,000 & \$ 21,000 & \$ 12,000 \\\hline \text { Contribution margin } & \$ 30,000 & \$ 19,000 & \$ 16,000 \\\hline \text { Fixed expenses } & \$ 12,000 & \$ 15,000 & \$ 17,000 \\\hline \text { Operating income (loss) } & \$ 18,000 & \$ 4,000 & \$ ( 1,000 ) \\\hline\end{array}$
Darren Company is thinking of dropping product line F because it is reporting an operating loss.
-All fixed expenses are unavoidable.Assuming Darren Company drops product line F and does not replace it,what affect will this have on operating income?

• A)Increase $16,000
• B)Decrease $16,000
• C)Increase $1,000
• D)Decrease $1,000