Question

Armor Sports, Inc. has two product lines—batting helmets and football helmets. The income statement data for...

Armor Sports, Inc. has two product lines—batting helmets and football helmets. The income statement data for the most recent year is as follows:

Total

Batting Helmets

Football Helmets

Sales revenue

$1,040,000

$700,000

$340,000

Variable costs

(430,000)

(150,000)

(280,000)

Contribution margin

$610,000

$550,000

$60,000

Fixed costs

(180,000)

(90,000)

(90,000)

Operating income (loss)

$430,000

$460,000

$(30,000)

What is the effect of dropping football helmets line on the operating income of the company? (Assume that fixed costs remain unchanged and that there would be no adverse effect on other sales.)

a

Operating income will increase by $90,000.

b

Operating income will decrease by $340,000.

c

Operating income will decrease by $60,000.

d

Operating income will increase by $30,000
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