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The income statement for Slumber Company is divided by its two product lines, blankets and pillows, as follows: Total $630,000 $300,000 $930,000 (445,000) (240,000) (685,000) $60,000 $245,000 (76,000) (150,000) $95,000 Blankets Pillows Sales revenue Variable costs Contribution margin $185,000 (74,000) $111,000 S(16,000) 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? O A. increase of $12,000 in operating income O B. increase of $72,000 in operating income OC. increase of $136,000 in operating income O D. decrease of $60,000 in operating income

The income statement for Slumber Company is divided by its two product lines, blankets and pillows, as follows: Total $630,000 $300,000 $930,000 (445,000) (240,000) (685,000) $60,000 $245,000 (76,000) (150,000) $95,000 Blankets Pillows Sales revenue Variable costs Contribution margin $185,000 (74,000) $111,000 S(16,000) 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? O A. increase of $12,000 in operating income O B. increase of $72,000 in operating income OC. increase of $136,000 in operating income O D. decrease of $60,000 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 Sales revenue $630,000 $300,000 $930,000 Variable costs (445,000) (240,000) (685,000) Contribution margin $185,000 $60,000 $245,000 (74,000) $111,000 S(16,000) $95,000 Fixed costs (76,000) (150,000) 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? O A. increase of $12,000 in operating income O B. increase of $72,000 in operating income OC. increase of $136,000 in operating income O D. decrease of $60,000 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 Sales revenue $630,000 $300,000 $930,000 Variable costs (445,000) (240,000) (685,000) Contribution margin $185,000 $60,000 $245,000 (74,000) $111,000 S(16,000) $95,000 Fixed costs (76,000) (150,000) 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? O A. increase of $12,000 in operating income O B. increase of $72,000 in operating income OC. increase of $136,000 in operating income O D. decrease of $60,000 in operating income
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