Contribution Margin Income Statement Data for the Most Recent Year

question 49

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 line is rented for $22,000 per year,how will operating income be affected?

• A)Decrease $28,000
• B)Increase $176,000
• C)Increase $28,000
• D)Increase $30,000

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