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?
A. Increase $69,000
B. Increase $10,000
C. Increase $128,000
D. Decrease $30,000