Question: Westfall Watches has two product lines: Luxury watches and Sporty watches. Income statement data for the most recent year follow:
Total Luxury Sporty Sales revenue $490,000 $360,000 $130,000
Variable expenses 355,000 235,000 120,000
Contribution margin 135,000 125,000 10,000
Fixed expenses 76,000 38,000 38,000
Operating income (loss) $59,000 $87,000 $(28,000)
If $20,000 of fixed costs will be eliminated by discontinuing the Sporty line, how will operating income be affected?