DJH Enterprises has 3 departments. Operating results for 2019 are as follows: Department 1 Department 2 Department 3 Sales $938,000 $450,800 $1,198,400 Variable Costs 623,000 401,800 842,800 Contribution Margin $315,000 $49,000 $355,600 Direct fixed expenses $168,000 $37,800 $228,200 Common fixed expenses 105,000 42,000 131,600 Total fixed expenses $273,000 $79,800 $359,800 Operating income (loss) $42,000 $(30,800) $(4,200) DJH is considering eliminating the departments that show losses. Assume that the direct fixed expenses could be avoided if the department is eliminated.What effect would elimination of Department 2 have on DJH’s total operating income? Select one: a. It would increase total operating income by $42,000. b. It would decrease total operating income by $7,000. c. It would decrease total operating income by $49,000. d. It would increase total operating income by $30,800. e. It would decrease total operating income by $11,200.
DJH Enterprises has 3 departments. Operating results for 2019 are as follows: Department 1 Department 2 Department 3 Sales $938,000 $450,800 $1,198,400 Variable Costs 623,000 401,800 842,800 Contribution Margin $315,000 $49,000 $355,600 Direct fixed expenses $168,000 $37,800 $228,200 Common fixed expenses 105,000 42,000 131,600 Total fixed expenses $273,000 $79,800 $359,800 Operating income (loss) $42,000 $(30,800) $(4,200) DJH is considering eliminating the departments that show losses. Assume that the direct fixed expenses could be avoided if the department is eliminated.What effect would elimination of Department 2 have on DJH’s total operating income? Select one: a. It would increase total operating income by $42,000. b. It would decrease total operating income by $7,000. c. It would decrease total operating income by $49,000. d. It would increase total operating income by $30,800. e. It would decrease total operating income by $11,200.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
DJH Enterprises has 3 departments. Operating results for 2019 are as follows:
| Department 1 | Department 2 | Department 3 | |
|---|---|---|---|
| Sales | $938,000 | $450,800 | $1,198,400 |
| Variable Costs | 623,000 | 401,800 | 842,800 |
| Contribution Margin | $315,000 | $49,000 | $355,600 |
| Direct fixed expenses | $168,000 | $37,800 | $228,200 |
| Common fixed expenses | 105,000 | 42,000 | 131,600 |
| Total fixed expenses | $273,000 | $79,800 | $359,800 |
| Operating income (loss) | $42,000 | $(30,800) | $(4,200) |
DJH is considering eliminating the departments that show losses. Assume that the direct fixed expenses could be avoided if the department is eliminated.
What effect would elimination of Department 2 have on DJH’s total operating income?
Select one:
a. It would increase total operating income by $42,000.
b. It would decrease total operating income by $7,000.
c. It would decrease total operating income by $49,000.
d. It would increase total operating income by $30,800.
e. It would decrease total operating income by $11,200.
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