Aj.2 Clothing Retail Store's accountant prepared the following income statement for the teenagers' accessories product line:SalesLess: Variable expensesContribution marginLess: Fixed expenses:WagesInsurance on inventoryAdvertisingNet operating income (loss)SalesManagement is concerned about the loss and is considering dropping the product line. If the product line is dropped, a job has to becreated elsewhere for a long-term employee currently earning an annual salary of $106,000Fixed expenses$1,116,00062,000682,000Required:Calculate the increase or decrease in the operating income in both alternatives.Net operating income (loss)$3,100,0001,457,0001,643,000O YesO No1,860,000$ (217,000)Should the teenagers' accessories product line be dropped?Keep Accesories Product LineDrop Accesories Product Line

Incremental Analysis: Incremental analysis refers to the analysis of differential revenue that could…

Clothing Retail Store's accountant prepared the following income statement for the teenagers' accessories product line: Sales Less: Variable expenses Contribution margin Less: Fixed expenses: Wages Insurance on inventory Advertising Net operating income (loss) $1,116,000 62,000 682,000 Sales $3,100,000 1,457,000 1,643,000 Management is concerned about the loss and is considering dropping the product line. If the product line is dropped, a job has t- created elsewhere for a long-term employee currently earning an annual salary of $106,000 Fixed expenses 1,860,000 $ (217,000) Required: Calculate the increase or decrease in the operating income in both alternatives. Keep Accesories Product Line Drop Accesories Product Line

Clothing Retail Store's accountant prepared the following income statement for the teenagers' accessories product line: Sales Less: Variable expenses Contribution margin Less: Fixed expenses: Wages Insurance on inventory Advertising Net operating income (loss) $1,116,000 62,000 682,000 Sales $3,100,000 1,457,000 1,643,000 Management is concerned about the loss and is considering dropping the product line. If the product line is dropped, a job has t- created elsewhere for a long-term employee currently earning an annual salary of $106,000 Fixed expenses 1,860,000 $ (217,000) Required: Calculate the increase or decrease in the operating income in both alternatives. Keep Accesories Product Line Drop Accesories Product Line

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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