Assume a retailing company has two departments-Department A and Department B. The income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Multiple Choice Total $ 800,000 320,000 480,000 400,000 $ 80,000 $(128,000) Department A Department B $ 450,000 200,000 250,000 260,000 The company says that $130,000 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 7%. What is me financial advantage (disadvantage) of discontinuing Department B? $ 350,000 120,000 230,000 140,000 $ 90,000 $ (10,000)
Assume a retailing company has two departments-Department A and Department B. The income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Multiple Choice Total $ 800,000 320,000 480,000 400,000 $ 80,000 $(128,000) Department A Department B $ 450,000 200,000 250,000 260,000 The company says that $130,000 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 7%. What is me financial advantage (disadvantage) of discontinuing Department B? $ 350,000 120,000 230,000 140,000 $ 90,000 $ (10,000)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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