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Shine Bright Company has three product lines-D, E, and F. The following information is available:...

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Accounting

  1. Shine Bright Company has three product lines-D, E, and F. The following information is available:

D

E

F

Sales

$60,000

$38,000

$26,000

Variable costs

36,000

18,000

12,000

Contribution margin

24,000

20,000

14,000

Fixed expenses

12,000

15,000

16,000

Operating income (loss)

$12,000

$5,000

$(2,000)

Shine Bright Company is thinking of dropping product line F because it is reporting an operating loss. Assuming fixed costs are unavoidable, if Shine Bright Company drops product line F and can use the space formerly used to produce product F to generate $17,000 of net income per year, what effect will this have on operating income? Should they drop Product F? **Show your work to support your answer.

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