Mission Company has three product lines: D, E, and F. The following information

Question

Mission Company has three product lines: D, E, and F. The following information is available $82,000 $42,000 $40,000 $12,000 $28,000 $47,000 $24,000 $23,000 $15,000 $8,000 $20,000 $12,000 $ 8,000 $17,000 $(9,000) Sales revenue Variable expenses Fixed expenses Operating income (loss) Mission Company is thinking of discontinuing product line F because it is reporting an operating loss. All fixed costs are unavoidable. Mission Company discontinues product line F and rents the space formerly used to produce product F for $18,000 per year, what affect will this have on operating income? 0 A. Increase $37,000 OB. Increase $10,000 O C. Decrease $10,000 O D. Increase $27,000

Explanation / Answer

Current total operating icnome=(28000+8000-9000)=27000

Now:

Operating income for D=$28000

Operating income for E=$8000

Less:fixed costs =(17000)

Add:rent generated=$18000

New net operating income=$37000

Hence increase =(37000-27000)=$10000(B).

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---