This Question 2 pts 6 of 30 5 complete Westfall Watches has

This Question: 2 pts 6 of 30 (5 complete)> Westfall Watches has two product lines: Luxury watches and Sporty watches. Income statement data for the most recent year follow: Total Sales revenue Variable expenses Contribution margin Fixed expenses Operating income (loss) Luxury Sporty $490,000 $360,000 $130,000 365,000 245.000 120,000 10,000 38,500 $48,000 $76,500 $(28,500) 125,000 15,000 38,500 77,000 If $25,000 of fixed costs will be eliminated by discontinuing the Sporty line, how will operating income be affected? O A. Increase $111,000 O B. Increase $13,000 O C. Increase $15,000 O D. Decrease $35,000

Solution

Answer to I question 1 : (C) operating income will be increased by 15000

Answer to II question : (C) 21 ( tax impact will not be considered as it wiill be borned by employee

Answer to III question : (A) Operating income will be increased by 85935. VC per unit is 27.15 and new sale price is 44, thus contribution margin will be 16.85/ per unit. Total income will be inreased by 85935 (16.85X5100 units). Fixed cost will unaltered.

Answer to IV question : (D) 92750 (Unfavorable) Std rate/hr(Std. hrs - Actual Hrs) 13.25/hr(25000-32000)

Answer to V question : ( A) 68050 Payment for June 32850 (45% of 73000)+ for May 35200(55%of 64000)