Solution-How would this business decision impact operating

How would this business decision impact operating income

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Question - The income statement for Bedtime Company is divided by its two product lines, blankets and pillows, as follows:

	Blankets	Pillows	Total
Sales revenue	$640,000	$298,000	$938,000
Variable costs	(465,000)	(242,000)	(707,000)
Contribution margin	$175,000	$56,000	$231,000
Fixed costs	(74,000)	(74,000)	(148,000)
Operating income (loss)	$101,000	$(18,000)	$83,000

Bedtime is considering eliminating the pillows product line. If this line is eliminated, Bedtime will be able to eliminate $72,000 of total fixed costs. How would this business decision impact operating income?

(a) increase of $72,000 in operating income (b) decrease of $56,000 in operating income (c) increase of $130,000 in operating income (d) increase of $16,000 in operating income.

Reference no: EM131596669

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How would this business decision impact operating income

Reference no: EM131596669

Reference no: EM131596669

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