Macaulay Company has three product lines?D, E, and F. The following information is available:

Macaulay Company is thinking of dropping product line F because it is reporting an operating loss. Assuming fixed costs are unavoidable, if Macaulay Company drops product line F and does not replace it, what effect will this have on operating income?

A) Operating income will increase $5,000.

B) Operating income will increase $20,000.

C) Operating income will increase $25,000.

D) Operating income will decrease $20,000.

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Sales Variable costs Contribution margin Fixed expenses Operating income (loss) D $70,000 (40,000) 30,000 (15,000) $15,000 E $40,000 (20,000) 20,000 (15,000) $5,000 F $30,000 (10,000) 20,000 (25,000) ($5,000) Sales Variable costs Contribution margin Fixed expenses Operating income (loss) D $70,000 (40,000) 30,000 (15,000) $15,000 E $40,000 (20,000) 20,000 (15,000) $5,000 F $30,000 (10,000) 20,000 (25,000) ($5,000)

Answer rating: 100% (QA)

D Operating income will decrease 20000 Explanation ... View the full answer