Question - The income statement for Bedtime Company is divided by its two product lines, blankets and pillows, as follows:
|
|
Blankets
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Pillows
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Total
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|
Sales revenue
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$640,000
|
$298,000
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$938,000
|
|
Variable costs
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(465,000)
|
(242,000)
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(707,000)
|
|
Contribution margin
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$175,000
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$56,000
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$231,000
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|
Fixed costs
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(74,000)
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(74,000)
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(148,000)
|
|
Operating income (loss)
|
$101,000
|
$(18,000)
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$83,000
|
Bedtime is considering eliminating the pillows product line. If this line is eliminated, Bedtime will be able to eliminate $72,000 of total fixed costs. How would this business decision impact operating income?
(a) increase of $72,000 in operating income (b) decrease of $56,000 in operating income (c) increase of $130,000 in operating income (d) increase of $16,000 in operating income.