Q.23 HM motors is considering eliminating its mountain bike division, which reported an operating loss for the recent year of P3,000. The division sales for the year = P1,050,000, variable costs = P860,000 Fixed costs of the division =P193,000 If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be: a.57,900 decrease b.132,100 decrease c54,900 decrease d.190,000 increase

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Q.23 HM motors is considering eliminating its mountain bike division, which reported an operating
loss for the recent year of P3,000.
The division sales for the year = P1,050,000, variable costs = P860,000
Fixed costs of the division =P193,000
If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be
eliminated.
The impact on operating income for eliminating this business segment would be:
a.57,900 decrease
b.132,100 decrease
c.54,900 decrease
d.190,000 increase
Transcribed Image Text:Q.23 HM motors is considering eliminating its mountain bike division, which reported an operating loss for the recent year of P3,000. The division sales for the year = P1,050,000, variable costs = P860,000 Fixed costs of the division =P193,000 If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be: a.57,900 decrease b.132,100 decrease c.54,900 decrease d.190,000 increase
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