Faros Hats, Etc. has two product lines-baseball helmets and football helmets. Income statement data for the most recent year follow:

If $50,000 of fixed costs will be eliminated by dropping the Football Helmets line, how will dropping Football Helmets affect the 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.

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Sales revenue Variable expenses Contribution margin Total $850,000 (530,000) $320,000 Fixed expenses (180,000) Operating income (loss) $140,000 Baseball Helmets Football Helmets $500,000 $350,000 (250,000) (280,000) $250,000 $70,000 (90,000) (90,000) $160,000 $(20,000) Sales revenue Variable expenses Contribution margin Total $850,000 (530,000) $320,000 Fixed expenses (180,000) Operating income (loss) $140,000 Baseball Helmets Football Helmets $500,000 $350,000 (250,000) (280,000) $250,000 $70,000 (90,000) (90,000) $160,000 $(20,000)

Answer rating: 100% (QA)

D Operating income will decrease by 20000 Explanatio... View the full answer