5. The income statement for Lovely Locks is divided by its two product lines, Cu

Q: 5. The income statement for Lovely Locks is divided by its two product lines, Cu

C. Will decrease by $50,000. Sales revenue, Curling Irons $610,000 Variable expenses, Curling Irons ($460,000) Contribution margin for Curling Irons only $150,000 Total fixed expenses for both products ($200,000) Operating income (loss) for Curling Irons only ($50,000) Operating income (loss) for both products $0 Difference in operating income ($50,000)

ID: 2516233 • Letter: 5

Question

5. The income statement for Lovely Locks is divided by its two product lines, Curling Irons and Straighteners, as follows: Curling IronsStraighteners Total $610,000 $870,000 70,000 $200,000 $200,000 Sales revenue $260,000 $210,000 $50,000 Variable expenses ntribution margin Fixed expenses Operating income (loss) If fixed costs remain unchanged and Lovely Locks discontinues the Straightener line, how will operating income change? 60,000 $150,000 $100,000 $50,000 ($50,000) $0 A.Will decrease by $200,000 B.Will increase by $50,000 CWill decrease by $60,000 DWill increase by $200,000

Explanation / Answer

C. Will decrease by $50,000.

Sales revenue, Curling Irons $610,000 Variable expenses, Curling Irons ($460,000) Contribution margin for Curling Irons only $150,000 Total fixed expenses for both products ($200,000) Operating income (loss) for Curling Irons only ($50,000) Operating income (loss) for both products $0 Difference in operating income ($50,000)

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5. The income statement for Lovely Locks is divided by its two product lines, Cu

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