Faros Hats, Etc - Assuming the Football Helmets Line Is Dropped, Total Fixed

question 120

Multiple Choice

Faros Hats, Etc. has two product lines-baseball helmets and football helmets. Income statement data for the most recent year follow: $\begin{array}{|l|r|r|r|} \hline&{\text { Total }} & \text { Baseball Helmets } & \text { Football Helmets } \\\hline \text { Sales revenue } & \$ 850,000 & \$ 500,000 & \$ 350,000 \\\hline \text { Variable expenses } & (530,000 & (250,000 & (280,000 \\\hline \text { Contribution margin } & \$ 320,000 & \$ 250,000 & \$ 70,000 \\\hline \text { Fixed expenses } & (180,000 & (90,000) & (90,000 \\\hline \text { Operating income (loss) } & \$ 140,000 & \$ 160,000 & \$(20,000 \\\hline\end{array}$
- Assuming the Football Helmets line is dropped, total fixed costs remain unchanged, and the space formerly used to produce the line is rented for $100,000 per year, how will operating income be affected?

• A) Operating income will increase $30,000.
• B) Operating income will increase $10,000.
• C) Operating income will decrease $10,000.
• D) Operating income will decrease $80,000.

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Sampling Distribution

Statistical probability distribution resulting from a random sampling.

Sample Proportions

A statistic that describes the fraction of items in a sample that meet a certain criteria, often used to estimate the proportion in the total population.

Population Proportions

A rephrased definition: The fraction of individuals in various categories relative to the total population under study.