Iver Roller Skates has three product lines—D, E, and F
The following information is available:
D E F
Sales revenue $90,000 $50,000 $30,000
Variable costs (40,000 ) (10,000 ) (11,000 )
Contribution margin $50,000 $40,000 $19,000
Fixed costs (10,000 ) (10,000 ) (24,000 )
Operating income (loss) $40,000 $30,000 $(5,000 )
The company is deciding whether to drop product line F because it has an operating loss. Assuming fixed costs are unavoidable, if Iver drops product line F and rents the space formerly used to produce product F for $19,000 per year, total income will be ________.
A) $11,000
B) $65,000
C) $19,000
D) $24,000
B .B)
D E F Total
Sales revenue $90,000 $50,000 $140,000
Variable costs 40,000 10,000 50,000
Contribution margin 50,000 40,000 90,000
Fixed costs 10,000 10,000 20,000
Unavoidable fixed costs 24,000 24,000
Operating income (loss) $40,000 $30,000 46,000
Other income 19,000
Total income $65,000
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