Protector,Inc

question 50

Multiple Choice

Protector,Inc.has two product lines-batting helmets and football helmets.The income statement data for the most recent year is as follows:

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 by $60,000.
• B)Operating income will increase by $40,000.
• C)Operating income will decrease by $40,000.
• D)Operating income will decrease by $60,000.

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Definitions:

Reacquired Shares

Shares that have been repurchased by the issuing company, reducing the amount of outstanding stock on the open market.

Common Stock

Common Stock represents equity ownership in a corporation, granting holders voting rights and a share in the company's profits through dividends.

Retained Earnings

The portion of net income left over for the business after it has paid out dividends to its shareholders, indicated on the balance sheet.

Net Income

The conclusive profit of a corporation post-deduction of all operational costs and taxation from the aggregate revenue.