DJH Enterprises has 3 departments. Operating results for 2019 are as follows: Department 1 Department 2 Department 3 Sales $837,500 $402,500 $1,070,000 Variable Costs 556,250 358,750 752,500 Contribution Margin $281,250 $43,750 $317,500 Direct fixed expenses $150,000 $33,750 $203,750 Common fixed expenses 93,750 37,500 117,500 Total fixed expenses $243,750 $71,250 $321,250 Operating income (loss) $37,500 $(27,500) $(3,750) 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 3 have on DJH’s total operating income? Select one: a. It would decrease total operating income by $113,750. b. It would decrease total operating income by $317,500. c. None of these options are correct. d. It would increase total operating income by $117,500. e. It would decrease total operating income by $3,750.
DJH Enterprises has 3 departments. Operating results for 2019 are as follows: Department 1 Department 2 Department 3 Sales $837,500 $402,500 $1,070,000 Variable Costs 556,250 358,750 752,500 Contribution Margin $281,250 $43,750 $317,500 Direct fixed expenses $150,000 $33,750 $203,750 Common fixed expenses 93,750 37,500 117,500 Total fixed expenses $243,750 $71,250 $321,250 Operating income (loss) $37,500 $(27,500) $(3,750) 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 3 have on DJH’s total operating income? Select one: a. It would decrease total operating income by $113,750. b. It would decrease total operating income by $317,500. c. None of these options are correct. d. It would increase total operating income by $117,500. e. It would decrease total operating income by $3,750.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
DJH Enterprises has 3 departments. Operating results for 2019 are as follows:
Department 1 Department 2 Department 3
Sales $837,500 $402,500 $1,070,000
Variable Costs 556,250 358,750 752,500
Contribution Margin $281,250 $43,750 $317,500
Direct fixed expenses $150,000 $33,750 $203,750
Common fixed expenses 93,750 37,500 117,500
Total fixed expenses $243,750 $71,250 $321,250
Operating income (loss) $37,500 $(27,500) $(3,750)
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 3 have on DJH’s total operating income?
Select one:
a. It would decrease total operating income by $113,750.
b. It would decrease total operating income by $317,500.
c. None of these options are correct.
d. It would increase total operating income by $117,500.
e. It would decrease total operating income by $3,750.
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