Shine Bright Company has three product lines-D, E, and F. The following information is available:...
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Accounting
Shine Bright Company has three product lines-D, E, and F. The following information is available:
D
E
F
Sales
$60,000
$38,000
$26,000
Variable costs
36,000
18,000
12,000
Contribution margin
24,000
20,000
14,000
Fixed expenses
12,000
15,000
16,000
Operating income (loss)
$12,000
$5,000
$(2,000)
Shine Bright Company is thinking of dropping product line F because it is reporting an operating loss. Assuming fixed costs are unavoidable, if Shine Bright Company drops product line F and can use the space formerly used to produce product F to generate $17,000 of net income per year, what effect will this have on operating income? Should they drop Product F? **Show your work to support your answer.
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