Discuss luxury watches and sporty watches

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Reference no: EM131755267

Westfall Watches has two product lines: Luxury watches and Sporty watches. Income statement data for the most recent year follow:

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)

If $20,000 of fixed costs will be eliminated by discontinuing the Sporty line, how will operating income be affected?

A. Increase $69,000

B. Increase $10,000

C. Increase $128,000

D. Decrease $30,000

Reference no: EM131755267

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