The following product line information is for the Swiss Watch Company. The company is considering dropping its Children's product line due to poor operating income performance. Fixed expenses are allocated to each product line based on sales revenue. Men's Women's Children's Sales $15,000 $25,000 $20,000 Variable expenses 5,000 7,500 12,500 Fixed expenses 7,500 12,500 10,000 Operating income $2,500 $5,000 $2,500 1. Calculate the effect on the Swiss Company's operating income if the children's watch product line is discontinued. Comment on your analysis. 2. Assume the Swiss Company's discontinues its Children's product line. Calculate the total operating income for the Swiss Company.
The following product line information is for the Swiss Watch Company. The company is considering dropping its Children's product line due to poor operating income performance. Fixed expenses are allocated to each product line based on sales revenue.
Men's Women's Children's
Sales $15,000 $25,000 $20,000
Variable expenses 5,000 7,500 12,500
Fixed expenses 7,500 12,500 10,000
Operating income $2,500 $5,000 $2,500
1. Calculate the effect on the Swiss Company's operating income if the children's watch product line is discontinued. Comment on your analysis.
2. Assume the Swiss Company's discontinues its Children's product line. Calculate the total operating income for the Swiss Company.
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