Question

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Top Hats Inc. has two product lines -baseball helmets and football helmets, The income statement data for this year is Baseball Helmets $500,000 (250,000) $250,000 (90,000) Football Helmets Total $350,000 (280,000) $70,000 (90,000) $(20,000) $850,000 (530,000) $320,000 (180,000) $140,000 Sales Revenue Variable Costs Contribution Margin Fixed Costs Operating income (loss)$160,000 6.The firm might drop the football helmets line, which would reduce the costs by $50,000.How would the firm's operating income be affected if football helmets are dropped? a. Operating income will increase by $50,000 b. Operating income will decrease by $70,000 c. Operating income will increase by $20,000 d. Operating income will decrease by $20,000 If Top Hat's total fixed costs remain unchanged, but the space formerly used produce the football helmets could be rented to another firm for $100,000 per year, how would dropping football helmets affect operating income? A. Operating income will increase by $30,000 B. Operating income will increase by $10,000 C. Operating income will decrease by $10,000 D. Operating income will decrease by $80,000

Answer 1

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