The Draper Company is considering dropping its Doombug toy due to continuing losses. Revenue and costs data on the toy for the past year follow:
Sales of 15,000 units $150,000
less Variable expenses $120,000
= Contribution margin $30,000
less Fixed expenses $40,000
= Net operating loss ($10,000)
If the toy were discontinued, then Draper could avoid $8,000 per year in fixed costs.
Under the given conditions, the change in annual operating income from discontinuing the production and sale of Doombugs would be: A $30,000 decrease B $10,000 increase C $22,000 decrease D $18,000 increase