Rocca Hats, Inc has two product lines—batting helmets and football helmets
The income statement data for the most recent year is as follows:
Total Batting Helmets Football Helmets
Sales revenue $940,000 $600,000 $340,000
Variable costs (430,000 ) (150,000 ) (280,000 )
Contribution margin $510,000 $450,000 $60,000
Fixed costs (180,000 ) (90,000 ) (90,000 )
Operating income (loss) $330,000 $360,000 $(30,000 )
Assuming the football helmet line is dropped, total fixed costs remain unchanged, and the space formerly used to produce the football helmet line is used to double the production of batting helmets, operating income will be ________.
A) $450,000
B) $180,000
C) $720,000
D) $360,000
C .C)
Batting Helmets
Sales revenue (600,000 x 2 ) $1,200,000
Variable costs (150,000 x 2 ) (300,000 )
Contribution margin 900,000
Fixed costs (180,000 )
Operating income $720,000
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