Jim Bean Company Has Three Product Lines: D, E, and F

Multiple Choice

Jim Bean Company has three product lines: D, E, and F. The following information is available: D E F
Sales revenue $ 80,000 $42,000 $20,000
Variable expenses $ 40,000 $21,000 $12,000
Contribution margin $ 40,000 $21,000 $ 8,000
Fixed expenses $ 12,000 $15,000 $17,000
Operating income (loss) $ 28,000 $46,000 $(9,000)
Jim Bean Company is thinking of discontinuing product line F because it is reporting an operating loss. All fixed costs are unavoidable. Assume Jim Bean Company is able to increase the sale price of product F to $32,000 with no change in volume of units sold and no change in variable costs or fixed costs. What affect will this have on operating income?

A) Increase $37,000
B) Increase $12,000
C) Decrease $12,000
D) Decrease $20,000