What would be the impact on LKOs operating income

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Reference no: EM132918348

Question - The LKO Company has the following information for the current year:

 

Customer YYY

Customer ZZZ

Revenue

$3,000,000

$4,000,000

Variable expenses

$1,800,000

$1,500,000

Contribution margin

$1,200,000

$2,500,000

Fixed expenses

$1,400,000

$1,800,000

Operating income

($200,000)

$700,000

Further analysis indicates that of the fixed expenses listed here, common fixed costs of $600,000 were allocated to each product. Based on this information, what would be the impact on LKO's operating income if it dropped Customer YYY?

A: Operating income would decrease by $1,300,000.

B: Operating income would decrease by $400,000.

C: Operating income would increase by $200,000.

D: Operating income would decrease by $1,200,000.

Reference no: EM132918348

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