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What will happen to operating income

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Question - Bally Company has three product lines: A, B and C. The following annual information is available:

                                         Product A        Product B      Product C

Sales                                 $60,000           $90,000        $24,000

Variable costs                     36,000         48,000      20,000  

Contribution margin            24,000         42,000       4,000    

Avoidable fixed costs          9,000       18,000        3,000    

Unavoidable fixed costs      6,000        2,400      9,000    

Operating income(loss)      $9,000        $15,000         $(1,400)

Assume Bally Company drops Product C. What will happen to operating income?

A. decrease by $1,000

B. increase by $3,800

C. decrease $1,400

D. increase by $1,400

Reference no: EM131598983

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