USE THE FOLLOWING INFORMATION FOR THE NEXT 4 QUESTIONS: Sports Hats, Etc. has tw

Question

USE THE FOLLOWING INFORMATION FOR THE NEXT 4 QUESTIONS: Sports Hats, Etc. has two product lines: baseball helmets and football helmets. Income statement data for the most recent year follow TotalBaseball Helmets Football Helmets $150,000 S460,000 S31 Sales revenue Variable expenses 75,000 Contribution margin Fixed expenses 105,000 Operating income (loss) 26. Assuming fixed costs remain unchanged, how would dropping the Football Helmets line affect operating income? A. Increase in total operating income of $8,000 B. Increase in total operating income of $38,000 C. Decrease in total operating income of $30,000 D. Decrease in total operating income of $150,000 27. If $20,000 of fixed costs will be eliminated by dropping the Football Helmets line, how will operating income be affected? A. Increase $12,000 B. Increase $20,000 C. Decrease $10,000 D. Decrease $14,000 28. Assuming the Football Helmets line is dropped, total fixed costs remain unchanged, and the space formerly used to produce the line is rented for $45,000 per year, how will operating income be affected? A. Increase $15,000 B. Increase $37,000 C. Decrease $7,000 D. Decrease $37,000

Explanation / Answer

26) C. Decrease in total operating income of $30000 , Fixed cost are irrelevant in decision making process, by dropping the football helmets line they will loose contribution of $30000.

27)   C. Decrease $10000 ,

loss in Contribution = (30000)

Add saving in fixed cost = $20000

Decrease in operating income = ($10000)

28.) A. Increase $15000 ,

loss in Contribution = (30000)

Add: rent (additional income) =   45000

   Increase in operating income = $15000

Related Questions

Navigate

• Browse (All)
• Browse U
• Subjects

---

---

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