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

Question

43. Boots Plus has two product lines: Hiking boots and Fashion boots. Income statement data for the most recent year follow Total $500,000 $360,000 $140,000 395,000 275,000 120,000 105,000 85,000 20,000 9,000 Hiking Fashion Sales revenue Variable expenses Contribution margin Fixed expenses Operating income (loss) $26,000 $45,500 $(19,500) Assuming the Fashion line is discontinued, total fixed costs remain unchanged, and the space formerly used to produce the line is rented for $28,000 per year, how will operating income be affected? 39,500 39,500 A.Increase $60,000 B.Increase $8,000 C. Decrease $8,000 D.Increase $34,000

Explanation / Answer

Option B. Increase Operating Income $8000

Sales revenue 360000 Additional Revenue 28000 Total Revenue 388000 Less. Operating Expense 275000 Contribution Margin 113000 Less Fixed Expense 79000

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