DM Corporation has provided you with the following budgeted income statement for one of their products:

DM has just encountered environmental problems with the product and will be forced to drop the product line altogether. They will be able to eliminate 75% of the fixed expenses. What will be the impact on operating income of the company?

A) Operating income will decrease by $195,000.

B) Operating income will decrease by $45,000.

C) Operating income will increase by $240,000.

D) Operating income will increase by $55,000.

Transcribed Image Text:

Sales Variable expenses Contribution margin Fixed expenses Operating loss $700,000 (430,000) $270,000 (300,000) ($30,000) Sales Variable expenses Contribution margin Fixed expenses Operating loss $700,000 (430,000) $270,000 (300,000) ($30,000)

Answer rating: 100% (QA)

B Operating income will decreas... View the full answer