FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Westfall Watches has two product lines: Luxury watches and Sporty watches. Income statement data for the most recent year
follow:
Sales revenue
-Variable expenses
Contribution margin
-Fixed expenses
$22,000
$81,000
$119,000
Sporty
$49,000
$130,000 $360,000
-120,000
=10,000
Luxury
-38,000
-235,000
-125,000
-38,000
Total
=$87,000
$490.000
=Operating income (loss)
$-28,000
Assuming the Sporty line is discontinued, total fixed costs remain unchanged and will continue, and the space formerly used to
produce the line is rented for $32,000 per year, what will be the new net operating income?
-355,000
=135,000
-76,000
=$59,000
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Transcribed Image Text:Westfall Watches has two product lines: Luxury watches and Sporty watches. Income statement data for the most recent year follow: Sales revenue -Variable expenses Contribution margin -Fixed expenses $22,000 $81,000 $119,000 Sporty $49,000 $130,000 $360,000 -120,000 =10,000 Luxury -38,000 -235,000 -125,000 -38,000 Total =$87,000 $490.000 =Operating income (loss) $-28,000 Assuming the Sporty line is discontinued, total fixed costs remain unchanged and will continue, and the space formerly used to produce the line is rented for $32,000 per year, what will be the new net operating income? -355,000 =135,000 -76,000 =$59,000
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