Faros Hats,Etc Assume Fixed Costs Remain Unchanged and That There Would Be

question 55

Multiple Choice

Faros Hats,Etc.has two product lines-baseball helmets and football helmets.Income statement data for the most recent year follow:
$$\begin{array} { | l | l | l | l | } \hline &{ \text { Total } } & { \text { Baseball Helmets } } &{ \text { Football Helmets } } \\\hline \text { Sales revenue } & \$ 840,000 & \$ 500,000 & \$ 340,000 \\\hline \text { Variable expenses } & ( 550,000 ) & ( 250,000 ) & ( \underline { 300,000 ) } \\\hline \text { Contribution margin } & \$ 290,000 & \$ 250,000 & \$ 40,000 \\\hline \text { Fixed expenses } & ( 160,000 ) & ( 70,000 ) & ( 90,000 ) \\\hline \text { Operating profit (loss) } & \$ 130,000 & \$ 180,000 & ( \$ 50,000 ) \\\hline\end{array}$$
Assume fixed costs remain unchanged and that there would be no adverse effect on other sales.What will be the effect of dropping Football Helmets line on the operating profit of the company?

• A) Operating profit will decrease by $340,000.
• B) Operating profit will decrease by $40,000.
• C) Operating profit will increase by $50,000.
• D) Operating profit will increase by $70,000.

---

Definitions:

NLRB

The National Labor Relations Board, an independent U.S. federal agency that protects employees' rights to organize and to determine their labor relations representatives.

Adjudicating Office

An official institution or body empowered to make legal judgments or decisions, often in the context of disputes.

General Counsel's Office

The department within an organization responsible for providing legal advice, handling lawsuits, and ensuring compliance with laws.

Exclusive Representation

A labor union's sole authority to represent and negotiate on behalf of all employees in a designated group or workplace, regardless of union membership.