Company X owns two brands: A and B. Operating income for each product last year is as follows:
If the company discontinues product B, one administrative position could be eliminated, saving the company $5000. Assuming no change in the sales of product A, what effect would discontinuing product B have on the company’s operating income?

Question

Company X owns two brands: A and B. Operating income for each product last year is as follows: 
  If the company discontinues product B, one administrative position could be eliminated, saving the company $5000. Assuming no change in the sales of product A, what effect would discontinuing product B have on the company’s operating income?

Answer

The operating income decreases

Answer

Operation income increases by $5000

Answer

Operation income increases by $13048

Answer

None of the others

Answer

Operating income increases $6000

	A	B
Revenues	$52000	$60000
Operating costs
Administrative salaries (fixed cost)	12000	8952
Wages (avoidable cost)	13000	38000
Supplies (avoidable cost)	5000	11000
Depreciation of equipment	2500	6000
Allocated corporate overhead	4000	8000

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Company X owns two brands: A and B. Operating income for each product last year...

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