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

Question

Boots Plus has two product lines: Hiking boots and Fashion boots. Income statement data for the most recent year follow: Total Sales revenue Variable expenses Contribution margin Fixed expenses Operating income (loss) Hiking $480,000 $340,000 245,000 95,000 39,000 $56,000 365,000 115,000 78,000 $37,000 Fashion $140,000 120,000 20,000 39,000 19,000) Assuming the Fashion line is discontinued, total fixed costs remain unchanged, and the space formerly used to produce the line is rented for $29,000 per year, how will operating income be affected? 0 A. Increase $83,000 OB, Increase $46,000 O C. Increase $9,000 OD. Decrease $9,000

Explanation / Answer

Operating income for Hiking=$56000

Less:Fixed costs of Fashion Line discontinued=($39000)

Add:rent for space formerly used=$29000

Total Operating income=$46000

Hence increase in Operating income=(46000-37000)=$9000(C).

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