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) $1,035,000 57,500 632,500 $2,875,000 1,351,250 1,523,750 1,725,000 $ (201,250) Management is concerned about the loss and is considering dropping the product line. If the product line is dropped, a job has to be created elsewhere for a long-term employee currently earning an annual salary of $101,500. Required: Calculate the increase or decrease in the operating income in both alternatives.

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) $1,035,000 57,500 632,500 $2,875,000 1,351,250 1,523,750 1,725,000 $ (201,250) Management is concerned about the loss and is considering dropping the product line. If the product line is dropped, a job has to be created elsewhere for a long-term employee currently earning an annual salary of $101,500. Required: Calculate the increase or decrease in the operating income in both alternatives.

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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