A manager at the Marina Concepts Store sells three levels of boat heaters, low, medium, and high, to house their winter boats. The managerial accountant reported the following information:

Low Lev. Medium Lev. High Lev.

Sales $25,000 $45,000 $20,000

Variable costs 4,000 6,000 12,200

Contribution margin 21,000 39,000 7,800

Fixed costs:

Avoidable 4,000 6,000 4,400

Unavoidable 5,000 ..5,500 3,500

Operating income $12,000 $27,500 $(100)

The high-level heater is operating at a loss. If the manager discontinued the high-level heater, what is the increase or decrease in operating income? What is the increase or decrease in operating income if the manager discontinued the heater and rented out the space used to store the heater for $11,000 per year?

A) $800 increase; $8,500 increase

B) $900 decrease; $9,200 decrease

C) $1,000 increase; $9,300 increase

D) $3,400 decrease; $7,600 increase

E) $1,600 increase; $9,600 increase

Answer rating: 100% (QA)

If manager discontinued High level heater Contribution margin lost 7800 Reduction of ... View the full answer