Head Bucket,Inc Assuming the Football Helmet Line Is Dropped,total Fixed Costs Remain

question 193

Multiple Choice

Head Bucket,Inc.has two product lines-batting helmets and football helmets.The income statement data for the most recent year is as follows: $$\begin{array} { | l | r | r | r | } \hline & { \text { Total } } & \text { Batting Helmets } & \text { Football Helmets } \\\hline \text { Sales revenue } & \$ 820,000 & \$ 500,000 & \$ 320,000 \\\hline \text { Variable costs } & ( 430,000 & ( 150,000 ) & ( 280,000 ) \\\hline \text { Contribution margin } & \$ 390,000 & \$ 350,000 & \$ 40,000 \\\hline \text { Fixed costs } & ( 160,000 & ( 70,000 ) & ( 90,000 ) \\\hline \text { Operating income (loss) } & \$ 230,000 & \$ 280,000 & \$ ( 50,000 ) \\\hline\end{array}$$ Assuming the football helmet line is dropped,total fixed costs remain unchanged,and the space formerly used to produce the football helmet line is used to double the production of batting helmets,operating income will be ________.

• A) $350,000
• B) $160,000
• C) $540,000
• D) $280,000

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Definitions:

Potential GDP

The highest level of real GDP that can be sustained over the long term without increasing inflation, assuming full employment of resources.

Expansionary Policy

A macroeconomic policy that aims to stimulate the economy by increasing government spending, decreasing taxes, or lowering interest rates to boost economic activity.

Anticipated Policy

Economic or governmental policies expected to be implemented in the future, which can influence current economic behaviors and decisions.

Wages

The compensation paid to employees for their labor, typically quantified as an hourly, daily, or piece-rate basis.