Assume a retalling company has two departments-Department A and Department B. The company's most recent contribution format Income statement follows: Department B $ 450,000 100,000 350,000 260,000 $ 90,000 Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Multiple Choice OOOO The company says that $60,000 of the fixed expenses being charged to Department A are sunk costs or allocated costs that will continue if the segment is discontinued. However, if Department A is discontinued the sales in Department B will drop by 18%. What is the financial advantage (disadvantage) of discontinuing Department A? $(103,000) $101,000) $(83.000) Total $ 800,000 $(92,000) 350,000 450,000 400,000 $ 50,000 Department A $ 350,000 250,000 100,000 140,000 $ (40,000)
Assume a retalling company has two departments-Department A and Department B. The company's most recent contribution format Income statement follows: Department B $ 450,000 100,000 350,000 260,000 $ 90,000 Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Multiple Choice OOOO The company says that $60,000 of the fixed expenses being charged to Department A are sunk costs or allocated costs that will continue if the segment is discontinued. However, if Department A is discontinued the sales in Department B will drop by 18%. What is the financial advantage (disadvantage) of discontinuing Department A? $(103,000) $101,000) $(83.000) Total $ 800,000 $(92,000) 350,000 450,000 400,000 $ 50,000 Department A $ 350,000 250,000 100,000 140,000 $ (40,000)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Assume a retailing company has two departments-Department A and Department B. The company's most recent contribution format Income statement follows:
Sales
Variable expenses
Contribution margin
Fixed expenses
Net operating income (loss)
Multiple Choice
O
The company says that $60,000 of the fixed expenses being charged to Department A are sunk costs or allocated costs that will continue if the segment is discontinued. However, if Department A is discontinued the sales In Department B will drop by 18%. What is the financial
advantage (disadvantage) of discontinuing Department A?
O
O
$(103.000)
$(101,000)
$(83.000)
Total
$ 800,000
350,000
450,000
400,000
$ 50,000
$(92,000)
Department A
$ 350,000
250,000
100,000
140,000
$ (40,000)
Department B
$ 450,000
100,000
350,000
260,000
$ 90,000
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