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Clothing Retail Store's accountant prepared the following income statement for the teenagers' accessories product line: Sales Less: Variable expenses Contribution margin Less: Fixed expenses: Wages Insurance on inventory Advertising Net operating income (loss) $1,116,000 62,000 682,000 Sales $3,100,000 1,457,000 1,643,000 Management is concerned about the loss and is considering dropping the product line. If the product line is dropped, a job has t- created elsewhere for a long-term employee currently earning an annual salary of $106,000 Fixed expenses 1,860,000 $ (217,000) Required: Calculate the increase or decrease in the operating income in both alternatives. Keep Accesories Product Line Drop Accesories Product Line

Clothing Retail Store's accountant prepared the following income statement for the teenagers' accessories product line: Sales Less: Variable expenses Contribution margin Less: Fixed expenses: Wages Insurance on inventory Advertising Net operating income (loss) $1,116,000 62,000 682,000 Sales $3,100,000 1,457,000 1,643,000 Management is concerned about the loss and is considering dropping the product line. If the product line is dropped, a job has t- created elsewhere for a long-term employee currently earning an annual salary of $106,000 Fixed expenses 1,860,000 $ (217,000) Required: Calculate the increase or decrease in the operating income in both alternatives. Keep Accesories Product Line Drop Accesories Product Line

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter17: Activity Resource Usage Model And Tactical Decision Making
Section: Chapter Questions
Problem 24P
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Clothing Retail Store's accountant prepared the following income statement for the teenagers' accessories product line: Sales Less: Variable expenses Contribution margin Less: Fixed expenses: Wages Insurance on inventory Advertising Net operating income (loss) Sales 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 $106,000 Fixed expenses $1,116,000 62,000 682,000 Required: Calculate the increase or decrease in the operating income in both alternatives. Net operating income (loss) $3,100,000 1,457,000 1,643,000 O Yes O No 1,860,000 $ (217,000) Should the teenagers' accessories product line be dropped? Keep Accesories Product Line Drop Accesories Product Line
Transcribed Image Text:Clothing Retail Store's accountant prepared the following income statement for the teenagers' accessories product line: Sales Less: Variable expenses Contribution margin Less: Fixed expenses: Wages Insurance on inventory Advertising Net operating income (loss) Sales 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 $106,000 Fixed expenses $1,116,000 62,000 682,000 Required: Calculate the increase or decrease in the operating income in both alternatives. Net operating income (loss) $3,100,000 1,457,000 1,643,000 O Yes O No 1,860,000 $ (217,000) Should the teenagers' accessories product line be dropped? Keep Accesories Product Line Drop Accesories Product Line
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