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Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow....

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Accounting

Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow.

Regular Super Total
Units 12,000 4,300 16,300
Sales revenue $ 360,000 $ 989,000 $ 1,349,000
Less: Cost of goods sold 288,000 645,000 933,000
Gross Margin $ 72,000 $ 344,000 $ 416,000
Less: Selling expenses 72,000 203,000 275,000
Operating income (loss) $ 0 $ 141,000 $ 141,000

Fixed manufacturing costs included in cost of goods sold amount to $2 per unit for Regular and $30 per unit for Super. Variable selling expenses are $3 per unit for Regular and $30 per unit for Super; remaining selling amounts are fixed. Omar Industries wants to drop the Regular product line. If the line is dropped, company-wide fixed manufacturing costs would fall by 20% because there is no alternative use of the facilities. What would be the impact on operating income if Regular is discontinued?

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