Problem
Faros Hats, Etc. has two product lines-baseball helmets and football helmets. Income statement data for the most recent year follow:
|
Total
|
Baseball Helmets
|
Football Helmets
|
|
Sales revenue
|
$850,000
|
$500,000
|
$350,000
|
|
Variable expenses
|
(530,000)
|
(250,000)
|
(280,000)
|
|
Contribution margin
|
$320,000
|
$250,000
|
$70,000
|
|
Fixed expenses
|
(180,000)
|
(90,000)
|
(90,000)
|
|
Operating income (loss)
|
$140,000
|
$160,000
|
$(20,000)
|
Assuming the Football Helmet line is dropped, total fixed costs remain unchanged, and the space formerly used to produce the Football Helmet line is used to double the production of Baseball Helmets, operating income will be:
A. $410,000
B. $320,000
C. $180,000
D. $250,000.