Assume a retailing company has two departments-Department A and Department B. The company's most recent contribution format income statement follows: Department A Department B $ 450,000 $ 350,000 120,000 200,000 230,000 250,000 140,000 260,000 $ 90,000 $ (10,000) Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) The company says that $110,000 of the fixed expenses being charged to Department B are sunk costs or allocated costs that will continue if the segment is discontinued. However, if Department B is discontinued the sales in Department A will drop by 12%. What is the financial advantage (disadvantage) of discontinuing Department B? Multiple Choice O O $(148,000) $(152,000) $(147,600) Total $ 800,000 320,000 480,000 400,000 $ 80,000 $(127,600)
Assume a retailing company has two departments-Department A and Department B. The company's most recent contribution format income statement follows: Department A Department B $ 450,000 $ 350,000 120,000 200,000 230,000 250,000 140,000 260,000 $ 90,000 $ (10,000) Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) The company says that $110,000 of the fixed expenses being charged to Department B are sunk costs or allocated costs that will continue if the segment is discontinued. However, if Department B is discontinued the sales in Department A will drop by 12%. What is the financial advantage (disadvantage) of discontinuing Department B? Multiple Choice O O $(148,000) $(152,000) $(147,600) Total $ 800,000 320,000 480,000 400,000 $ 80,000 $(127,600)
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 5PB: Wellington, Inc., reports the following contribution margin income statement for the month of May....
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