Karlson Roller Skates Has Three Product Lines-D,E,and F The Company Is Deciding Whether to Drop Product Line F

Multiple Choice

Karlson Roller Skates has three product lines-D,E,and F.The following information is available: $$\begin{array} { | l | r | r | c | } \hline & \text { D } & \text { E } & \text { F } \\\hline \text { Sales revenue } & \$ 80,000 & \$ 50,000 & \$ 31,000 \\\hline \text { Variable costs } & ( 20,000 ) & ( \underline { 5000 ) } & \underline { ( 10,000 ) } \\\hline \text { Contribution margin } & \$ 60,000 & \$ 45,000 & \$ 21,000 \\\hline \text { Fixed costs } & ( 15,000 ) & ( 5000 ) & ( 23,000 ) \\\hline \text { Operating income (loss) } & \$ 45,000 & \$ 40,000 & \$ ( 2000 ) \\\hline\end{array}$$ The company is deciding whether to drop product line F because it has an operating loss.Assuming fixed costs are unavoidable,if Karlson drops product line F and rents the space formerly used to produce product F for $18,000 per year,total operating income will be ________.

A) $10,000
B) $80,000
C) $21,000
D) $23,000