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DJH Enterprises has 3 departments. Operating results for 2019 are as follows:   Department 1 Department 2 Department 3 Sales $938,000 $450,800 $1,198,400 Variable Costs 623,000 401,800 842,800 Contribution Margin $315,000 $49,000 $355,600 Direct fixed expenses $168,000 $37,800 $228,200 Common fixed expenses 105,000 42,000 131,600 Total fixed expenses $273,000 $79,800 $359,800 Operating income (loss) $42,000 $(30,800) $(4,200) DJH is considering eliminating the departments that show losses. Assume that the direct fixed expenses could be avoided if the department is eliminated.What effect would elimination of Department 2 have on DJH’s total operating income? Select one: a. It would increase total operating income by $42,000. b. It would decrease total operating income by $7,000. c. It would decrease total operating income by $49,000. d. It would increase total operating income by $30,800. e. It would decrease total operating income by $11,200.

DJH Enterprises has 3 departments. Operating results for 2019 are as follows:   Department 1 Department 2 Department 3 Sales $938,000 $450,800 $1,198,400 Variable Costs 623,000 401,800 842,800 Contribution Margin $315,000 $49,000 $355,600 Direct fixed expenses $168,000 $37,800 $228,200 Common fixed expenses 105,000 42,000 131,600 Total fixed expenses $273,000 $79,800 $359,800 Operating income (loss) $42,000 $(30,800) $(4,200) DJH is considering eliminating the departments that show losses. Assume that the direct fixed expenses could be avoided if the department is eliminated.What effect would elimination of Department 2 have on DJH’s total operating income? Select one: a. It would increase total operating income by $42,000. b. It would decrease total operating income by $7,000. c. It would decrease total operating income by $49,000. d. It would increase total operating income by $30,800. e. It would decrease total operating income by $11,200.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter7: Allocating Costs Of Support Departments And Joint Products
Section: Chapter Questions
Problem 30E: A company uses charging rates to allocate service department costs to the using departments. The...
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DJH Enterprises has 3 departments. Operating results for 2019 are as follows:

  Department 1 Department 2 Department 3
Sales $938,000 $450,800 $1,198,400
Variable Costs 623,000 401,800 842,800
Contribution Margin $315,000 $49,000 $355,600
Direct fixed expenses $168,000 $37,800 $228,200
Common fixed expenses 105,000 42,000 131,600
Total fixed expenses $273,000 $79,800 $359,800
Operating income (loss) $42,000 $(30,800) $(4,200)

DJH is considering eliminating the departments that show losses. Assume that the direct fixed expenses could be avoided if the department is eliminated.
What effect would elimination of Department 2 have on DJH’s total operating income?

Select one:
a. It would increase total operating income by $42,000.
b. It would decrease total operating income by $7,000.
c. It would decrease total operating income by $49,000.
d. It would increase total operating income by $30,800.
e. It would decrease total operating income by $11,200. 
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