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