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Homework answers / question archive / Your Retail Store's accountant prepared the following income statement for the ladies' accessories product line: Sales $ 2,825,000 Less: Variable expenses 1,327,750 Contribution margin 1,497,250 Less: Fixed expenses: Wages $ 1,017,000 Insurance on inventory 56,500 Advertising 621,500 1,695,000 Net operating income (loss) $ (197,750 ) Management is concerned about the loss and is considering dropping the product line
Your Retail Store's accountant prepared the following income statement for the ladies' accessories product line:
Sales $ 2,825,000
Less: Variable expenses 1,327,750
Contribution margin 1,497,250
Less: Fixed expenses:
Wages $ 1,017,000
Insurance on inventory 56,500
Advertising 621,500 1,695,000
Net operating income (loss) $ (197,750 )
Management is concerned about the loss and is considering dropping the product line. If the product line is dropped, a job has to be created elsewhere for a long-term employee currently earning an annual salary of $84,750.
Calculate the increase or decrease in the operating income in both alternatives.