Westfall Watches has two product lines: Luxury watches and Sporty watches. Incom

Question

Westfall Watches has two product lines: Luxury watches and Sporty watches. Income statement data for the most recent year follow:

Assuming fixed costs remain unchanged, how would discontinuing the Sporty line affect operating income?

Increase in total operating income of $49,000

Decrease in total operating income of $6000

Increase in total operating income of $130,000

Decrease in total operating income of $131,000

? Total Luxury Sporty Sales revenue $490,000 $360,000 $130,000 Variable expenses 359,000 235,000 124,000 Contribution margin 131,000 125,000 6000 Fixed expenses 76,000 38,000 38,000 Operating income (loss) $55,000 $87,000 -$32,000

Explanation / Answer

Answer is Decrease in total operating income of $6,000.

Explanation:

The Net Income/(Decrease) in income:

Loss of revenue of sporty division: $ 130,000

Less: Savings in variable cost: $ 124,000

Net Loss in income $6,000

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.