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The income statement for Slumber Company is divided by its two product lines, blankets and pillows, as follows: Blankets Pillows Total $630,000 $300,000 $930,000 (465,000) (240,000) (705,000) $165,000 $60,000 $225,000 (76,000) (76,000) (152,000) $89,000 $(16,000) $73,000 Sales revenue Variable costs Contribution margin Fixed costs Operating income (loss) Slumber is considering eliminating the pillows product line. If this line is eliminated, Slumber will be able to eliminate $72,000 of total fixed costs. How would this business decision impact operating income? OA. decrease of $60,000 in operating income B. increase of $72,000 in operating income OC. increase of $12,000 in operating income OD. increase of $136,000 in operating income

The income statement for Slumber Company is divided by its two product lines, blankets and pillows, as follows: Blankets Pillows Total $630,000 $300,000 $930,000 (465,000) (240,000) (705,000) $165,000 $60,000 $225,000 (76,000) (76,000) (152,000) $89,000 $(16,000) $73,000 Sales revenue Variable costs Contribution margin Fixed costs Operating income (loss) Slumber is considering eliminating the pillows product line. If this line is eliminated, Slumber will be able to eliminate $72,000 of total fixed costs. How would this business decision impact operating income? OA. decrease of $60,000 in operating income B. increase of $72,000 in operating income OC. increase of $12,000 in operating income OD. increase of $136,000 in operating income

FINANCIAL ACCOUNTING
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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The income statement for Slumber Company is divided by its two product lines, blankets and pillows, as follows: Blankets Pillows Total $630,000 $300,000 $930,000 (465,000) (240,000) (705,000) $165,000 $60,000 $225,000 (76,000) (76,000) (152,000) $89,000 $(16,000) $73,000 Sales revenue Variable costs Contribution margin Fixed costs Operating income (loss) Slumber is considering eliminating the pillows product line. If this line is eliminated, Slumber will be able to eliminate $72,000 of total fixed costs. How would this business decision impact operating income? A. decrease of $60,000 in operating income B. increase of $72,000 in operating income C. increase of $12,000 in operating income D. increase of $136,000 in operating income
Transcribed Image Text:The income statement for Slumber Company is divided by its two product lines, blankets and pillows, as follows: Blankets Pillows Total $630,000 $300,000 $930,000 (465,000) (240,000) (705,000) $165,000 $60,000 $225,000 (76,000) (76,000) (152,000) $89,000 $(16,000) $73,000 Sales revenue Variable costs Contribution margin Fixed costs Operating income (loss) Slumber is considering eliminating the pillows product line. If this line is eliminated, Slumber will be able to eliminate $72,000 of total fixed costs. How would this business decision impact operating income? A. decrease of $60,000 in operating income B. increase of $72,000 in operating income C. increase of $12,000 in operating income D. increase of $136,000 in operating income
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