FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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has a shoes and a shirts division. The company reported the following segmented Income statement for last month:
Sales
Variable expenses
Contribution Margin
Fixed Expenses
Net operating Income (loss)
Multiple Choice
O
O
O
Division
Shoes
Shirts
$4,200,000 $3,000,000 $1,200,000
2.000.000
1.500.000
1,500,000
1.300.000
200,000
O
The company predicts that $200,000 of the fixed expenses being charged to the Shirts Division are allocated costs that will continue even if the Shirts Division is eliminated. The elimination of the Shirts Division will additionally cause a 20% drop in
Shoes Division sales. If the company shuts down its Shirts Division, by how much will the company's overall net operating income change?
2,200,000
2.200.000
Increase by $240,000
Decrease by $300,000
Total
Decrease by $330,000
Increase by $330,000
0
500.000
700,000
900.000
(200,000)
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Transcribed Image Text:has a shoes and a shirts division. The company reported the following segmented Income statement for last month: Sales Variable expenses Contribution Margin Fixed Expenses Net operating Income (loss) Multiple Choice O O O Division Shoes Shirts $4,200,000 $3,000,000 $1,200,000 2.000.000 1.500.000 1,500,000 1.300.000 200,000 O The company predicts that $200,000 of the fixed expenses being charged to the Shirts Division are allocated costs that will continue even if the Shirts Division is eliminated. The elimination of the Shirts Division will additionally cause a 20% drop in Shoes Division sales. If the company shuts down its Shirts Division, by how much will the company's overall net operating income change? 2,200,000 2.200.000 Increase by $240,000 Decrease by $300,000 Total Decrease by $330,000 Increase by $330,000 0 500.000 700,000 900.000 (200,000)
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