Crash Sports,Inc.has two product lines-batting helmets and football helmets.The income statement data for the most recent year is as follows: \[\begin{array} { | l | r | r | r | } \hline & { \text { Total } } & \text { Batting Helmets } & \text { Football Helmets } \\ \hline \text { Sales revenue } & \$ 1,050,000 & \$ 700,000 & \$ 350,000 \\ \hline \text { Variable costs } & \underline { ( 530,000 } & \underline { ( 250,000 ) } & ( 280,000 ) \\ \hline \text { Contribution margin } & \$ 520,000 & \$ 450,000 & \$ 70,000 \\ \hline \text { Fixed costs } & ( 170,000 & ( 80,000 ) & ( 90,000 ) \\ \hline \text { Operating income (loss) } & \$ 350,000 & \$ 370,000 & \$ ( 20,000 ) \\ \hline \end{array}\] If $50,000 of fixed costs will be eliminated by dropping the football helmets line,how will dropping football helmets affect operating income of the company?

A) Operating income will increase by $50,000. B) Operating income will increase by $70,000. C) Operating income will decrease by $90,000. D) Operating income will decrease by $20,000. A) Operating income will increase by $50,000. B) Operating income will increase by $70,000. C) Operating income will decrease by $90,000. D) Operating income will decrease by $20,000.

Peacock Purse sells designer and everyday priced handbags.Top management is deciding which product line to emphasize.Company accountants have provided the following data: \[\begin{array} { | l | r | r | } \hline & \begin{array} { r } \text { Designer } \\ \text { Per Item } \end{array} & \begin{array} { r } \text { Everyday } \\ \text { Per Item } \end{array} \\ \hline \text { Average Sales Price } & \$ 250 & \$ 95 \\ \hline \text { Average Variable Costs } & 100 & \underline { 25 } \\ \hline \text { Average Contribution Margin } & 150 & 70 \\ \hline \text { Average Fixed Costs (allocated) } & \underline { 30 } & \underline { 10 } \\ \hline \text { Average Operating Income } & \$ 120 & \$ 60 \\ \hline \end{array}\] The store has 5,000 square feet of floor space.If the company emphasizes everyday handbags,it can display 1,000 items in the store.If the store emphasizes designer handbags,it can display only 680 items.These numbers are also the average monthly sales in units. Prepare an analysis to show which product the company should emphasize.Explain your answer.(Do not round intermediate answers.)

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Mobile Concepts makes special equipment used in cell towers.Each unit sells for $420.Mobile Concepts uses just-in-time inventory procedures; it produces and sells 12,500 units per year.It has provided the following income statement data: $\begin{array}{|l|c|l|c|} \hline \text { Traditional Format }&&\text { Contribution Margin Format}\\ \hline \text { Sales revenue } & \$ 5,250,000 & \text { Sales revenue } & \$ 5,250,000 \\ \hline \text { Cost of goods sold } & 3,200,000 & \text { Variable costs: } & \\ \hline \text { Gross profit } & 2,050,000 & \text { Manufacturing } & 1,200,000 \\ \hline \text { Selling \& admin, expenses } & 770,000 & \text { Selling \& admin. } & 500,000 \\ \hline & & \text { Contribution margin } & 3,550,000 \\ \hline & & \text { Fixed costs: } & \\ \hline & & \text { Manufacturing } & 2,000,000 \\ \hline & & \text { Selling \& admin. } & 270,000 \\ \hline \text { erating income } & \$ 1,280,000 & \text { Operating income } & \$ 1,280,000 \\ \hline \end{array}$ A foreign company has offered to buy 110 units for a reduced sales price of $300 per unit.The marketing manager says the sale will have no negative impact on the company's regular sales.The sales manager says that this sale will not require any variable selling and administrative costs.The production manager reports that there is plenty of excess capacity to accommodate the deal without requiring any additional fixed costs.If Mobile Concepts accepts the deal,how will this impact operating income? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)

A) Operating income will increase by $22,440. B) Operating income will decrease by $22,440. C) Operating income will increase by $33,000. D) Operating income will decrease by $33,000. A) Operating income will increase by $22,440. B) Operating income will decrease by $22,440. C) Operating income will increase by $33,000. D) Operating income will decrease by $33,000.

Maritime Sail Makers manufactures sails for sailboats.The company has the capacity to produce 36,000 sails per year and is currently producing and selling 25,000 sails per year.The following information relates to current production: \[\begin{array} { | l | r | } \hline \text { Sales price per unit } & \$ 185 \\ \hline \text { Variable costs per unit: } & \\ \hline \text { Manufacturing } & \$ 60 \\ \hline \text { Selling and administrative } & \$ 10 \\ \hline \text { Total fixed costs: } & \\ \hline \text { Manufacturing } & \$ 700,000 \\ \hline \text { Selling and administrative } & \$ 250,000 \\ \hline \end{array}\] If a special pricing order is accepted for 5700 sails at a sales price of $160 per unit,fixed costs remain unchanged,and there are no variable selling and administrative costs for this order,what is the change in operating income?

A) Operating income decreases by $513,000. B) Operating income decreases by $570,000. C) Operating income increases by $513,000. D) Operating income increases by $570,000. A) Operating income decreases by $513,000. B) Operating income decreases by $570,000. C) Operating income increases by $513,000. D) Operating income increases by $570,000.

Fletcher Company is trying to decide whether to trade in equipment used in its manufacturing process for a newer model.The new equipment will save money because it will be more efficient to use.Indicate if the following items are relevant or irrelevant to this decision. \[\begin{array} { | l | l | } \hline \text { Item } & \begin{array} { c } \text { Relevant or } \\ \text { Irrelevant } \end{array} \\ \hline \text { The price of the new equipment } & \\ \hline \text { The price paid for the old equipment } & \\ \hline \text { The trade in value of the old equipment } & \\ \hline \text { The repair costs that will be incurred if the old } & \\ \text { equipment is kept } & \\ \hline \text { The expected cost savings of the new equipment } & \\ \hline \text { The costs that have been incurred on the old equipment } & \\ \hline \end{array}\]

\[\begin{array} { | l | l | } \hline \t

A company has two different products that are sold in different markets.Financial data are as follows: \[\begin{array} { | l | r | r | r | } \hline & \text { Product A } & \text { Product B } & \text { Total } \\ \hline \text { Revenue } & \$ 18,000 & \$ 9400 & \$ 27,400 \\ \hline \text { Variable cost } & ( 8000 ) & ( 9800 ) & ( 17,800 ) \\ \hline \text { Fixed cost (allocated) } & \underline { ( 1000 ) } & \underline { ( 2000 ) } & \underline { ( 3000 ) } \\ \hline \text { Operating income (loss) } & \$ 9000 & \$ ( 2400 ) & \$ 6600 \\ \hline \end{array}\] Assume that fixed costs of $1000 could be eliminated if Product B was dropped.Assume furthermore that dropping one product would not impact sales of the other.If Product B is dropped,what would be the impact on total operating income of the company?

A) increases by $1000 B) increases by $1400 C) increases by $400 D) increases by $2000 A) increases by $1000 B) increases by $1400 C) increases by $400 D) increases by $2000