Blossom Trivia Co. manufactures and sells two trivia products, the Square Trivia Game and the Round Trivia Game. Last quarter’s operating profits, by product, and for the company as a whole, were as follows: Square Round Total Sales revenue $17,800 $6,620 $24,420 Variable expenses 4,520 2,900 7,420 Contribution margin 13,280 3,720 17,000 Fixed expenses 2,900 4,200 7,100 Operating income $ 10,380 $(480 ) $ 9,900 Forty percent of the Round Game’s fixed costs could have been avoided if the game had not been produced or sold. If the Round Game had been discontinued before the last quarter, what would operating income have been for the company as a whole?

Operating income          $ 7860    if the   Round Trivia Game had not been produced or sold.

Explanation:

Blossom Trivia Co. Manufacturers

                      Square Trivia Game        Round Trivia Game     Total

Sales revenue           $17,800                 $6,620                  $24,420

Variable expenses        4,520                   2,900                     7,420

Contribution margin      13,280                   3,720                  17,000

Fixed expenses               2,900                  4,200                  7,100

Operating income          $ 10,380             $(480 )               $ 9,900

40% of Round Game fixed Costs= 40 % of  4,200= $1680

Unavoidable fixed costs= 4200- 1680= $ 2520

Adding these unavoidable fixed costs to the Square Trivia Game would give the company an operating income of   $ 7860      

Blossom Trivia Co. Manufacturers

                      Square Trivia Game      

Sales revenue           $17,800                  

Variable expenses        4,520                  

Contribution margin      13,280                  

Fixed expenses               2,900 + 2520= $ 5420                

Operating income          $ 7860            

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