Central Industries has three product lines: A, B and C. The following information is available: Product A Product B Product C Sales $100,000 $90,000 $44,000 Variable costs 76,000 48,000 35,000 Contribution margin 24,000 42,000 9,000 Avoidable fixed costs 9,000 18,000 3,000 Unavoidable fixed costs 6,000 9,000 7,700 Operating income(loss) $9,000 $15,000 $(1,700) Central Industries is thinking about dropping Product C because it is reporting a loss. Assume Central Industries drops Product C and does not replace it. What will happen to operating income

It will decrease by 6,000 which is the operating contribtuion generated for the product before allocation of common fixed cost.

Explanation:

We have to build the segment income statement

As the Product is generating a positive contribution for 6,000 it would be a financial disadvantage to discontinued. It is making a "loss" because of the common fixed cost allocated to the product not, the product.

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answer; lags, push the econ below the natural level of output;