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Calculate the increase in the operating income

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Your Retail Store's accountant prepared the following income statement for the ladies' accessories product line:

Sales $ 2,825,000

Less: Variable expenses 1,327,750

Contribution margin 1,497,250

Less: Fixed expenses:

Wages $ 1,017,000

Insurance on inventory 56,500

Advertising 621,500 1,695,000

Net operating income (loss) $ (197,750 )

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 $84,750.

Question 1: Calculate the increase or decrease in the operating income in both alternatives.

Reference no: EM132584974

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