The income statement for Germain Appliances is divided by its two product lines, Toasters and Microwaves, as follows: Toaster Microwave Total Sales revenue $650,000 $255,000 $905,000 Variable expenses $460,000 $210,000 $670,000 Contribution margin $190,000 $45,000 $235,000 Fixed expenses $90,000 $90, 000 $180,000 Operating income (loss) $100,000 $ (45,000) $55,000 If Germain Appliances can eliminate fixed costs of $ 36,000 by discontinuing the Microwave line, then discontinuing it should result in which of the following? A. Decrease in total operating income of $10,000 B. Increase in total operating income of $10,000 C. Decrease in total operating income of $ (25,000) D. Increase in total operating income of $ (25,000)

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Business

Copeland

22 April, 10:16

The income statement for Germain Appliances is divided by its two product lines, Toasters and Microwaves, as follows: Toaster Microwave Total Sales revenue $650,000 $255,000 $905,000 Variable expenses $460,000 $210,000 $670,000 Contribution margin $190,000 $45,000 $235,000 Fixed expenses $90,000 $90, 000 $180,000 Operating income (loss) $100,000 $ (45,000) $55,000 If Germain Appliances can eliminate fixed costs of $ 36,000 by discontinuing the Microwave line, then discontinuing it should result in which of the following? A. Decrease in total operating income of $10,000 B. Increase in total operating income of $10,000 C. Decrease in total operating income of $ (25,000) D. Increase in total operating income of $ (25,000)

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Answers (1)

Know the Answer?

Rodolfo Gilbert · Answer 1

The correct answer is A.

Explanation:

Giving the following information:

Toaster Microwave Total

Sales revenue $255,000

Variable expenses $210,000

Contribution margin $45,000

Fixed expenses $90,000

Operating income (loss) $ (45,000)

Germain Appliances can eliminate fixed costs of $ 36,000 by discontinuing the Microwave line.

New income = 100,000 - 54,000 = 46,000

Difference = 46,000 - 55,000 = - 9,000