How do you solve this question from special decisions in accounting?

Anonymous
timer Asked: Mar 23rd, 2016

Question description

Pottery Unlimited has two product lines:  cups and pitchers.  Income statement data for the most recent year follow:

Total

Cups

Pitchers

Sales revenue

$460,000

$310,000

$150,000

Variable expenses

355,000

235,000

120,000

Contribution margin

105,000

75,000

30,000

Fixed expenses

76,000

38,000

38,000

Operating income (loss)

$29,000

$37,000

$(8,000)

If $23814 in fixed costs will be eliminated by dropping the CUP line, how will operating income be affected?  If income drops, use a negative sign in front of the number.


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