14. A company operates with two departments: Department AA and Department BB. The manager is considering to drop Department BB because of the income statement prepared by the bookkeeper shown below: Dept. AA Dept. BB Sales P3,000,000 P1,000,000 Less: Variable costs 900,000 400,000 Contribution Margin 2,100,000 600,000 Less: Total Fixed costs 1,400,000 800,000 Operating Profit/(loss) P 700,000 (P200,000) Of the total fixed costs, P350,000 allocated to Det. BB is considered ass sunk cost. In, addition if Dept. BB will be eliminated 10% decrease of sales in Dept. AA will occur. a. What is the segment margin of Department BB? b. If Dept. BB will be dropped, what will be the amount of operating income of the company?
14. A company operates with two departments: Department AA and Department BB. The manager is considering to drop Department BB because of the income statement prepared by the bookkeeper shown below: Dept. AA Dept. BB Sales P3,000,000 P1,000,000 Less: Variable costs 900,000 400,000 Contribution Margin 2,100,000 600,000 Less: Total Fixed costs 1,400,000 800,000 Operating Profit/(loss) P 700,000 (P200,000) Of the total fixed costs, P350,000 allocated to Det. BB is considered ass sunk cost. In, addition if Dept. BB will be eliminated 10% decrease of sales in Dept. AA will occur. a. What is the segment margin of Department BB? b. If Dept. BB will be dropped, what will be the amount of operating income of the company?
Chapter10: Short-term Decision Making
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14. A company operates with two departments: Department AA and Department BB. The manager is considering to drop Department BB because of the income statement prepared by the bookkeeper shown below:
Dept. AA Dept. BB
Sales P3,000,000 P1,000,000
Less: Variable costs 900,000 400,000
Contribution Margin 2,100,000 600,000
Less: Total Fixed costs 1,400,000 800,000
Operating Profit/(loss ) P 700,000 (P200,000)
Of the total fixed costs, P350,000 allocated to Det. BB is considered ass sunk cost. In, addition if Dept. BB will be eliminated 10% decrease of sales in Dept. AA will occur.
a. What is the segment margin of Department BB?
b. If Dept. BB will be dropped, what will be the amount of operating income of the company?
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