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Determine what operating income will be

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Reference no: EM132612260

Denly Company has three products, A, B, and C. The following information is available:

                                             Product A                          Product B                    Product C

Sales                               $60,000                           $90,000                   $24,000
Variable costs                 36,000                                 48,000                     15,000
Contribution margin             24,000                                42,000                     9,000

Fixed costs:

Avoidable                           9,000                                 18,000                  6,000
Unavoidable                      6,000                                      9,000                  5,400
Operating income               $ 9,000                                $15,000                     $ (2,400)

Question i. Denly Company is thinking of dropping Product C because it is reporting a loss. Assuming Denly drops Product C and does not replace it, operating income will be?

Question ii. Assuming Product C is discontinued and the space formerly used to produce Product C is rented for $12,000 per year, operating income will be?

Reference no: EM132612260

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