Question: Below is information about the three product lines that make up MAG's Construction Materials Company. Sales -Variable Costs Contribution Margin -Fixed Costs NOI Blocks

Below is information about the three product lines that make up MAG's

 

Below is information about the three product lines that make up MAG's Construction Materials Company. Sales -Variable Costs Contribution Margin -Fixed Costs NOI Blocks $500,000 $250,000 $250,000 Bricks $800,000 $480,000 Houp $320,000 $90,000 $230,000 Tile $150,000 $140,000 $10,000 Total $1,450,000 $870,000 $580,000 $100,000 $55,000 $245,000 $150,000 ($45,000) $335,000 MAG is considering dropping the Tile product line. Traceable fixed costs associated with the Tile product line are $10,000 in advertising expenses and $35,000 in supervisor salaries, which would be eliminated if they dropped the Tile product line. The remaining fixed costs are allocated to the Tile product line based on production floor space utilized. If MAG drops the Tile product line, they estimate that sales of Blocks will decrease by 10% and sales of Bricks will decrease by 8%. Will MAG's Net Operating Income (NOI) increase or decrease if they drop the Tile product line, and by how much?

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