Because the company is in a start-up stage, corporate management feels that the East sales territory is creating too much of a cash drain on the company and it should be eliminated. If East is discontinued, one sales manager (whose salary is P40,000 per year) will be relocated to the West territory. By how much would Opal’s income decrease if the East territory is eliminated?
Because the company is in a start-up stage, corporate management feels that the East sales territory is creating too much of a cash drain on the company and it should be eliminated. If East is discontinued, one sales manager (whose salary is P40,000 per year) will be relocated to the West territory. By how much would Opal’s income decrease if the East territory is eliminated?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Because the company is in a start-up stage, corporate management feels that the East sales territory is creating too much of a cash drain on the company and it should be eliminated. If East is discontinued, one sales manager (whose salary is P40,000 per year) will be relocated to the West territory.
By how much would Opal’s income decrease if the East territory is eliminated?
Transcribed Image Text:Opal Company has two sales territories-North and South. Financial information for the two
territories for 2001 follows:
East
P980,000
West
P750,000
Sales
Direct costs:
(343,000)
(450,000)
(275,000)
P (88,000)
Variable
(225,000)
(325,000)
(175,000)
P 25,000
Fixed
Allocated common costs
Net income (loss)
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