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ACE-739 Inc. has a shoes and a shirts division. The company reported the following segmented income statement for last month: Sales Variable expenses Contribution Margin Total Multiple Choice Decrease by $530,000 Decrease by $500,000 Increase by $530,000 Increase by $440,000 2,200,000 Division Shoes $4,200,000 $3,000,000 $1,200,000 2,000,000 1,500,000 500,000 2,200,000 1,500,000 Fixed Expenses Net operating income (loss) 0 (200,000) The company predicts that $250,000 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 30% 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? Shirts 1,300,000 200,000 700,000 900,000

ACE-739 Inc. has a shoes and a shirts division. The company reported the following segmented income statement for last month: Sales Variable expenses Contribution Margin Total Multiple Choice Decrease by $530,000 Decrease by $500,000 Increase by $530,000 Increase by $440,000 2,200,000 Division Shoes $4,200,000 $3,000,000 $1,200,000 2,000,000 1,500,000 500,000 2,200,000 1,500,000 Fixed Expenses Net operating income (loss) 0 (200,000) The company predicts that $250,000 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 30% 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? Shirts 1,300,000 200,000 700,000 900,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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ACE-739 Inc. has a shoes and a shirts division. The company reported the following segmented income statement for last month: Division Shoes Sales Variable expenses Contribution Margin Total $4,200,000 $3,000,000 $1,200,000 2,000,000 1,500,000 500,000 2,200,000 1,500,000 2,200,000 Shirts Fixed Expenses Net operating income (loss) 0 The company predicts that $250,000 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 30% 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? Multiple Choice Decrease by $530,000 Decrease by $500,000 Increase by $530,000 Increase by $440,000 1,300,000 200,000 700,000 900,000 (200,000)
Transcribed Image Text:ACE-739 Inc. has a shoes and a shirts division. The company reported the following segmented income statement for last month: Division Shoes Sales Variable expenses Contribution Margin Total $4,200,000 $3,000,000 $1,200,000 2,000,000 1,500,000 500,000 2,200,000 1,500,000 2,200,000 Shirts Fixed Expenses Net operating income (loss) 0 The company predicts that $250,000 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 30% 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? Multiple Choice Decrease by $530,000 Decrease by $500,000 Increase by $530,000 Increase by $440,000 1,300,000 200,000 700,000 900,000 (200,000)
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