Twinkie Trivia Co. manufactures and sells two trivia products, the Square Trivia

Question

Twinkie Trivia Co. manufactures and sells two trivia products, the Square Trivia Game and the Round Trivia Game. Last quarter’s operating profits, by product, and for the company as a whole, were as follows:

Forty percent of the Round Game’s fixed costs could have been avoided if the game had not been produced or sold.

If the Round Game had been discontinued before the last quarter, what would operating income have been for the company as a whole?

Square Round Total Sales revenue $11,000 $6,600 $17,600 Variable expenses 4,400 3,000 7,400 Contribution margin 6,600 3,600 10,200 Fixed expenses 2,750 4,200 6,950 Operating income $ 3,850 $(600 ) $ 3,250

Explanation / Answer

Operating income without round =3250-3600+(4200*40%)= $1330

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