problem 6 (10 points): Armor Sports, Inc. has two product lines-baseball bats an
ID: 2517961 • 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: les revenue ariable costs Total $950,00 Baseball Bats Tennis Rack $600,000 $350,00 co653000 000 ontribution margin $460,000 $400,00 $60,000 ixed costs perating income oss) 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 after discontinuing Tennis Rackets=$40000
Hence new net operating income for the company would be=(330,000-40000)=$290,000
Hence effect of dropping tennis rackets=(290,000-290,000)=$0.
Hence no change would occur to the company .
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