Citrus Industries Has Three Product Lines, A, B, and C

Citrus Industries has three product lines, A, B, and C. The following information is available: $$\begin{array} { l l l l } & \underline { \mathrm { A } } & \underline { \mathrm { B } } & \underline { \mathrm { C } } \\\text { Sales } & \$ 60,000 & \$ 90,000 & \$ 24,000 \\\text { Variable costs } & \underline { 36,000 } & \underline { 48,000 } & \underline { 20,000 } \\\text { Contribution margin } & \$ 24,000 & \$ 42,000 & \$ 4,000 \\\text { Fixed costs: } & & & \\\text { Avoidable } & \mathbf { 9 , 0 0 0 } & 18,000 & 3,000 \\\text { Unavoidable } & \underline { 6,000 } & \underline { 9,000 } & \underline { 2,400 } \\\text { Operating income } & \underline { \$ 9,000 } & \underline { \$ 15,000 } & \underline {( \$ 1,400) }\end{array}$$ Assuming Citrus Industries can increase the selling price of product C to $30,000, all other information remaining constant, operating income will:

A) increase $6,000
B) decrease $6,000
C) decrease $3,600
D) increase $3,600

Correct Answer:

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