DropSeg 1183 Corporation has two departments, Kids and Adults. The company's most recent monthly contribution format income statement follows: Department Kids Sales Variable expenses Contribution Mergin Fixed Expenses Net operating income (loss) Total Adults $4,200,000 $3,000,000 $1,200,000 2.000.000 1.500.000 500.000 2,200,000 1,500,000 700,000 2.200.000 Multiple Choice 0 1.300.000 200,000 900.000 (200,000) A study indicates that $250,000 of the fixed expenses being charged to the Adults Department are sunk costs or allocated costs that will continue even if the Adults Department is dropped. In addition, the elimination of the Adults Department will result in a 10% decrease in the sales of the Kids Department. If the Adults Department is dropped, what will be the effect on the net operating income of the DropSeg 1183 Corporation as a whole?

DropSeg 1183 Corporation has two departments, Kids and Adults. The company's most recent monthly contribution format income statement follows: Department Kids Sales Variable expenses Contribution Mergin Fixed Expenses Net operating income (loss) Total Adults $4,200,000 $3,000,000 $1,200,000 2.000.000 1.500.000 500.000 2,200,000 1,500,000 700,000 2.200.000 Multiple Choice 0 1.300.000 200,000 900.000 (200,000) A study indicates that $250,000 of the fixed expenses being charged to the Adults Department are sunk costs or allocated costs that will continue even if the Adults Department is dropped. In addition, the elimination of the Adults Department will result in a 10% decrease in the sales of the Kids Department. If the Adults Department is dropped, what will be the effect on the net operating income of the DropSeg 1183 Corporation as a whole?

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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