申論題

二、 20% Wisdom Industries manufactures and sells two products: Simple and Deluxe. The results of operations for 2017 follow.
                               
Fixed manufacturing costs included in cost of goods sold amount to $8 per unit for Simple and $25 per unit for Deluxe. Variable selling expenses are $10 per unit for Simple and $30 per unit for Deluxe； remaining selling amounts are fixed.
Required:
Answer the following questions independently.
 

2. Wisdom Industries wants to drop the Simple 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 Simple is discontinued?