Central Industries has three product lines: A, B, and C. The information given below is available. Central Industries is thinking about dropping Product C because it is reporting a loss. Assume Central Industries drops Product C ?and does not replace it. What will happen to operating income Sales Variable costs Contribution margin Avoidable fixed costs Unavoidable fixed costs Operating income(loss) Product A S100,000 76.000 24,000 9,000 6.000 $9.000 Product B $90,000 48.000 42,000 18,000 9.000 $15.000 Product C $44,000 35,000 9,000 3,000 7,700 $(1.700) increase by S600 () increase by $1,700 () decrease by S6,000 decrease by S9,000 increase by S2,400 O O OO

Central Industries has three product lines: A, B, and C. The information given below is available. Central Industries is thinking about dropping Product C because it is reporting a loss. Assume Central Industries drops Product C ?and does not replace it. What will happen to operating income Sales Variable costs Contribution margin Avoidable fixed costs Unavoidable fixed costs Operating income(loss) Product A S100,000 76.000 24,000 9,000 6.000 $9.000 Product B $90,000 48.000 42,000 18,000 9.000 $15.000 Product C $44,000 35,000 9,000 3,000 7,700 $(1.700) increase by S600 () increase by $1,700 () decrease by S6,000 decrease by S9,000 increase by S2,400 O O OO

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Granfield Company is considering eliminating its backpack division, which reported a loss for the recent year of $46,500 as shown below. Segment Income (Loss) Sales Variable costs Contribution margin Fixed costs Income (loss) If the backpack division is dropped, all $484,000 of its variable costs are avoidable, and $216,200 of its fixed costs are avoidable. The impact on Granfield's income from eliminating this business segment would be: Multiple Choice $494,000 decrease $216,200 increase $277,800 decrease $ 978,000 484,000 494,000 540,500 $ (46,500) $494,000 increase
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