Question - Bally Company has three product lines: A, B and C. The following annual information is available:
Product A Product B Product C
Sales $60,000 $90,000 $24,000
Variable costs 36,000 48,000 20,000
Contribution margin 24,000 42,000 4,000
Avoidable fixed costs 9,000 18,000 3,000
Unavoidable fixed costs 6,000 2,400 9,000
Operating income(loss) $9,000 $15,000 $(1,400)
Assume Bally Company drops Product C. What will happen to operating income?
A. decrease by $1,000
B. increase by $3,800
C. decrease $1,400
D. increase by $1,400