Your Retail Stores accountant prepared the following income statement for the ladies accessories product line: Sales $ 2,925,000 Less: Variable expenses 1,374,750 Contribution margin 1,550,250 Less: Fixed expenses: Wages $ 1,053,000 Insurance on inventory 58,500 Advertising 643,500 1,755,000 Net operating income (loss) $ (204,750) Management is concerned about the loss and is considering dropping the product line. If the product line is dropped, a job has to be created elsewhere for a long-term employee currently earning an annual salary of $87,750. Required: Calculate the increase or decrease in the operating income in both alternatives..

1. Your Retail Stores accountant prepared the following income statement for the ladies accessories
product line:
Sales $ 2,925,000 Less: Variable expenses 1,374,750 Contribution margin 1,550,250 Less: Fixed
expenses: Wages $ 1,053,000 Insurance on inventory 58,500 Advertising 643,500 1,755,000 Net
operating income (loss) $ (204,750) Management is concerned about the loss and is considering
dropping the product line. If the product line is dropped, a job has to be created elsewhere for a
long-term employee currently earning an annual salary of $87,750. Required: Calculate the
increase or decrease in the operating income in both alternatives.