Problem
Pottery Unlimited has two product lines: cups and pitchers. Income statement data for the most recent year follow
|
TOTAL
|
CUPS
|
PITCHERS
|
|
Sales Revenue
|
460,000
|
310,000
|
150,000
|
|
Variable Expenses
|
355,000
|
235,000
|
120,000
|
|
Contribution Margin
|
105,000
|
75,000
|
30,000
|
|
Fixed Expenses
|
76,000
|
38,000
|
38,000
|
|
Operating Income (Loss)
|
29,000
|
37,000
|
(8,000)
|
If $20412 in fixed costs will be eliminated by dropping the CUP line, how will operating income be affected?