The income statement for Lovely Locks is divided by its two product lines, Curli

Question

The income statement for Lovely Locks is divided by its two product lines, Curling Irons and Straighteners, as follows Sales revenue Variable expenses Contribution margin Fixed expenses Operating income (loss) Curling Irons Straighteners $260,000 $210,000 $50,000 $75,000 S(25,000) $630,000 $500,000 $130,000 $75,000 $55,000 Total $890,000 $710,000 $180,000 $150,000 $30,000 If fixed costs remain unchanged and Lovely Locks discontinues the Straightener line, how will operating income change? ( A. Will increase by $150,000 ( B. Will decrease by $150,000 ( C. Will increase by $50,000 0 D. will decrease by $50,000

Explanation / Answer

Net income will decrease by $50000 if Straighteners line is dropped. The contribution margin lost will reduce the operating income Option D is correct

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