Clothing Retail Store's accountant prepared the following income statement for the teenagers' accessories product line: $3,100,000 1,457,000 1,643,000 Sales Less: Variable expenses Contribution margin Less: Fixed expenses: Wages Insurance on inventory. Advertising Net operating income (loss) $1,116,000 62,000 682,000 1,860,000 $ (217,000) Management is concerned about the loss and is considering dropping the product line. If the product line is dropped, a job has to be created elsewhere for a long-term employee currently earning an annual salary of $106,000 Required: Calculate the increase or decrease in the operating income in both alternatives.

Clothing Retail Store's accountant prepared the following income statement for the teenagers' accessories product line: $3,100,000 1,457,000 1,643,000 Sales Less: Variable expenses Contribution margin Less: Fixed expenses: Wages Insurance on inventory. Advertising Net operating income (loss) $1,116,000 62,000 682,000 1,860,000 $ (217,000) Management is concerned about the loss and is considering dropping the product line. If the product line is dropped, a job has to be created elsewhere for a long-term employee currently earning an annual salary of $106,000 Required: Calculate the increase or decrease in the operating income in both alternatives.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 24P

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