Westfall Watches has two product lines: Luxury watches and Sporty watches. Assuming the Sporty line is discontinued, total fixed costs remain unchanged, and the space formerly used to produce the Sporty line is used to increase the production of Luxury watches by 250%, how will operating income be affected given the following Income statement data?

	Total	Luxury	Sporty
Sales revenue	$490,000	$360,000	$130,000
Variable expenses	355,000	235,000	120,000
Contribution margin	135,000	125,000	10,000
Fixed expenses	76,000	38,000	38,000
Operating income (loss)	$59,000	$87,000	$(28,000)

a. Increase $236,500

b. Increase $177,500

c. Decrease $177,500

d. Increase $299,500

Answer rating: 100% (QA)

Westfall Watches has two product line and wish to discontinue spoty wat... View the full answer