Faros Hats,Inc What Is the Effect of Dropping Football Helmets Line on Statement

question 76

Multiple Choice

Faros Hats,Inc.has two product lines-batting helmets and football helmets.The income statement data for the most recent year is as follows: $$\begin{array} { | l | r | r | r | } \hline & { \text { Total } } & \text { Batting Helmets } & \text { Football Helmets } \\\hline \text { Sales revenue } & \$ 1,050,000 & \$ 700,000 & \$ 350,000 \\\hline \text { Variable costs } & \underline { ( 530,000 } & \$ 250,000 ) & ( 280,000 ) \\\hline \text { Contribution margin } & \$ 520,000 & \$ 450,000 & \$ 70,000 \\\hline \text { Fixed costs } & ( 200,000) & (90,000 ) & ( 110,000 ) \\\hline \text { Operating income (loss) } & \$ 320,000 & \$ 360,000 & \$ ( 40,000 ) \\\hline\end{array}$$ What is the effect of dropping football helmets line on the operating income of the company? (Assume that fixed costs remain unchanged and that there would be no adverse effect on other sales.)

• A) Operating income will increase by $40,000.
• B) Operating income will increase by $90,000.
• C) Operating income will decrease by $70,000.
• D) Operating income will decrease by $350,000.

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Definitions:

Controlling Limbs

The ability of the nervous system to coordinate and execute physical movements of the arms and legs.

Creativity

The ability to produce original and valuable ideas, involving imagination and the generation of new solutions to problems.

Hearing

The sensory process by which sound is received, interpreted, and understood by the auditory system.

Mirror Neuron

A neuron that fires both when an individual acts and when the individual observes the same action performed by another, thereby playing a role in learning and empathy.