Question

Question 16 Crash Sports, Inc. has two product lines-batting helmets and football helmets. The income statement data for the most recent year is as follows: Not yet answered Marked out of 2.00 P Flag question Sales revenue Variable costs Contribution margin Fixed costs Operating income (loss) Total Batting Helmets Football Helmets $1,050,000 $700,000 $350,000 (430,000) (150,000) (280,000 $620,000 $550,000 $70,000 (180.000) 190.000 190.000 $440,000 $460,000 $120,000 If $50,000 of fixed costs will be eliminated by dropping the football helmets line, how will dropping football helmets affect operating income of the company? Select one: O A. Operating income will increase by $70,000. B. Operating income will increase by $50,000 O C. Operating income will decrease by $20,000. O D. Operating income will decrease by $90,000,

Answer 1

16	Income Statement if Football Helmets dropped
	Sales Revenue	$                  700,000
	Less:Variable Cost	$                -150,000
	Contribution margin	$                  550,000
	Less:Fixed Cost	$                -130,000
	Net Income	$                  420,000
	So the Operating Income has decereased by $20,000
	So Option C is answer
17	Labor Efficiency Variance occurs when the Actual labor hours are more than the standard hours estimated.
	So Option A is answer
18	The less the Payback period the lower is the risk, It means that the lower the Payback period the sooner it will be for the project
	torecover it's Initial Investment
	So in this case Project Y has the lowest Payback period hence the same will be Rank 1 and then Project Z and then Project X
	So Option C is answer