Reference no: EM133056397
Question - Gum Gum Corporation has three product lines, Spearmint, Peppermint, and Cinnamon. The following information is available: Spearmint Peppermint Cinnamon Sales $120,000 $70,000 $77,000 Variable costs 98,000 49,000 68,000 Contribution margin 22,000 21,000 9,000 Fixed costs: Avoidable 9,000 11,000 6,000 Unavoidable 5,000 4,000 7,000 Operating income $8,000 $6,000 $(4,000) Assuming the Cinnamon product line is discontinued, and the space formerly used to produce the Cinnamon product line is rented for $11,000 per year, will the operating income increase or decrease and by how much? Show your calculations.
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