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Carns Company is considering eliminating its Small Tools Division, which reported a loss for the prior year of $255,000 as shown below. Segment Income (Loss) Sales $ 1,480,000 Variable costs 1,345,000 Contribution margin 135,000 390,000 Fixed costs Income (loss) $ (255,000) If the Small Tools Division is dropped, all of its variable costs are avoidable, and $117,000 of its fixed costs are avoidable. The impact on Carns's income from eliminating the Small Tools Division would be: $18,000 decrease $39,900 decrease $117,000 decrease $18,000 increase

Carns Company is considering eliminating its Small Tools Division, which reported a loss for the prior year of $255,000 as shown below. Segment Income (Loss) Sales $ 1,480,000 Variable costs 1,345,000 Contribution margin 135,000 390,000 Fixed costs Income (loss) $ (255,000) If the Small Tools Division is dropped, all of its variable costs are avoidable, and $117,000 of its fixed costs are avoidable. The impact on Carns's income from eliminating the Small Tools Division would be: $18,000 decrease $39,900 decrease $117,000 decrease $18,000 increase

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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Carns Company is considering eliminating its Small Tools Division, which reported a loss for the prior year of $255,000 as shown below. Segment Income (Loss) Sales Variable costs 1,345,000 Contribution margin 135,000 390,000 Fixed costs Income (loss) $(255,000) $ 1,480,000 If the Small Tools Division is dropped, all of its variable costs are avoidable, and $117,000 of its fixed costs are avoidable. The impact on Carns's income from eliminating the Small Tools Division would be: $18,000 decrease $39,900 decrease $117,000 decrease $18,000 increase
Transcribed Image Text:Carns Company is considering eliminating its Small Tools Division, which reported a loss for the prior year of $255,000 as shown below. Segment Income (Loss) Sales Variable costs 1,345,000 Contribution margin 135,000 390,000 Fixed costs Income (loss) $(255,000) $ 1,480,000 If the Small Tools Division is dropped, all of its variable costs are avoidable, and $117,000 of its fixed costs are avoidable. The impact on Carns's income from eliminating the Small Tools Division would be: $18,000 decrease $39,900 decrease $117,000 decrease $18,000 increase
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