2. Black Productions has three models: D, E, and F. The following information is available:

	Model D	Model E	Model F
Sales revenue	$65,000	$33,000	$24,000
Variable expenses	$32,000	$13,000	$14,000
Contribution margin	$33,000	$20,000	$10,000
Fixed expenses	$16,000	$16,000	$16,000
Operating income (loss)	$17,000	$4,000	$(6,000)

Black Productions is thinking of discontinuing model F because it is reporting an operating loss. All fixed costs are unavoidable. Black Productions discontinues model F and rents the space formerly used to produce product F for $15,000 per year, what effect will this have on operating income?

A.Increase $21,000

B.Decrease $21,000

C.Decrease $5,000

D.Increase $5,000

3.Sky High Seats manufactures seats for airplanes. The company has the capacity to produce 100,000 seats per year, but is currently produces and sells 75,000 seats per year. The following information relates to current production of seats:

Sale price per unit	$400
Variable costs per unit:
Manufacturing	$220
Marketing and administrative	$50
Total fixed costs:
Manufacturing	$750,000
Marketing and administrative	$200,000

If a special sales order is accepted for 2,500 seats at a price of $320 per unit, fixed costs increase by $5,000, and variable marketing and administrative costs for that order are $25 per unit, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.)

A.Increase by $182,500

B.Decrease by $182,500

C.Increase by $187,500

D.Increase by $245,000