Boots Plus has two prcduct lines: Hiking boots and Fashion boots. Income stateme

Question

Boots Plus has two prcduct lines: Hiking boots and Fashion boots. Income statement data for the most recent year follow Sales revenue Variable expenses Contribution margin Fixed expenses Operating income (loss) Total $480,000 $385 000 95,000 77,000 $18.000 Hiking $340,000 265000 75,000 38,500 536.500 Fashion $140,000 120000 20,000 38,500 S(18.500) Assuming the Fashion line is discontinued, total fixed costs remain unchanged, and the space formerly used to produce the Fashion line is used to increase the production of Hiking boots by 250%, how will operating income be affected? O A. Increase $92,500 O B. Increase $265,000 O C. Decrease $92,500 D. Increase $110,500

Explanation / Answer

Loss in contribution margin -20000 Gain in contribution margin from Hiking 112500 =75000*150% Change in income 92500 Option A is correct

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