Problem 6 (10 points): Armor Sports, Inc. has two product lines-baseball bats an
ID: 2518099 • Letter: P
Question
Problem 6 (10 points): Armor Sports, Inc. has two product lines-baseball bats and tennis rackets. The income statement data for the most recent year is as follows: Total $950,000 Baseball BatsTennis Rackets ales revenue Variable costs Contribution margin Fixed costs perating income loss $600,000 $350,000 $60,000 100,000 $(40,000 $400,000 $460,000 (170,000 $290,000 $330,000 What is the effect of dropping tennis rackets line on the operating income of the company? (Assume that $40,000 fixed costs is unavoidable and that there would be no adverse effect on other sales.)Explanation / Answer
Fixed costs unavaoidable for tennis rackets=$40000
Hence net new operating income for the company=$330,000+(40000)
=$290,000
Hence change in net operating income=(290,000-290000)=$0.
Hence there is no change.