Geo Company's western territory's forecasted income statement for the upcoming year is as follows: Sales revenue $840,000 (520,000) $320,000 (490,000) $(170,000) Variable costs Contribution margin Fixed costs Operating loss The company's management is considering dropping the western territory and has determined that 80% of the fixed costs are avoidable. What is the change in the forecasted operating loss for the upcoming year if the western territory is dropped? Assume the company predicts an operating loss across the entire company. O A. The loss will be reduced by $392,000. O B. The loss will be reduced by $72,000. OC. The loss will be increased by $72,000. O D. The loss will be increased by $392,000.
Geo Company's western territory's forecasted income statement for the upcoming year is as follows: Sales revenue $840,000 (520,000) $320,000 (490,000) $(170,000) Variable costs Contribution margin Fixed costs Operating loss The company's management is considering dropping the western territory and has determined that 80% of the fixed costs are avoidable. What is the change in the forecasted operating loss for the upcoming year if the western territory is dropped? Assume the company predicts an operating loss across the entire company. O A. The loss will be reduced by $392,000. O B. The loss will be reduced by $72,000. OC. The loss will be increased by $72,000. O D. The loss will be increased by $392,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Geo Company's western territory's forecasted income statement for the upcoming year is as follows:
Sales revenue
$840,000
Variable costs
Contribution margin
(520,000)
$320,000
(490,000)
$(170,000)
Fixed costs
Operating loss
The company's management is considering dropping the western territory and has determined that 80% of the fixed costs are avoidable. What is the change in the forecasted operating loss for the upcoming year if the western territory is
dropped? Assume the company predicts an operating loss across the entire company.
O A. The loss will be reduced by $392,000.
O B. The loss will be reduced by $72,000
O C. The loss will be increased by $72,000.
O D. The loss will be increased by $392,000.
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