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Calculate the effect on the swiss company operating income

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Reference no: EM131782813

Question - 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.

 

Watch products

 

Men's

Women's

Children's

Sales

$15,000

$25,000

$20,000

Variable expenses

5,000

7,500

12,500

Fixed expenses (50% of sales)

7,500

12,500

10,000

Operating income

$2,500

$5,000

$(2,500)

(a) Calculate the effect on the Swiss Company's operating income if the Children's watch product line is discontinued. Comment on your analysis.

(b) Assume the Swiss Company discontinues its Children's product line. Calculate the total operating income for the Swiss Company.

Reference no: EM131782813

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