Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow.

Regular Super Total Units                               12,000                        3,700                     15,700

Sales revenue                                               $ 336,000               $ 814,000             $ 1,150,000

Less: Cost of goods sold                                276,000                   481,000                  757,000

Gross Margin                                                  $ 60,000                $ 333,000              $ 393,000

Less: Selling expenses                                      60,000                   190,000                 250,000

Operating income (loss)                                $          0                $ 143,000              $ 143,000

Fixed manufacturing costs included in cost of goods sold amount to $2 per unit for Regular and $20 per unit for Super. Variable selling expenses are $3 per unit for Regular and $20 per unit for Super; remaining selling amounts are fixed. Omar Industries wants to drop the Regular product line. If the line is dropped, company-wide fixed manufacturing costs would fall by 10% because there is no alternative use of the facilities. What would be the impact on operating income if Regular is discontinued?

Multiple Choice 

$9,800 increase. 

None of the answers is correct. 

$38,200 decrease. 

$24,000 increase. 

$0.

Answer rating: 100% (QA)

Regular 336000 276000 2 x 12000 84000 Gross margin 8... View the full answer