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Lowell dropped Chico, Incorporated as a client, and all common fixed costs are unavoidable, how would profit be affected?

Lowell dropped Chico, Incorporated as a client, and all common fixed costs are unavoidable, how would profit be affected?

FINANCIAL ACCOUNTING
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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The accounting firm of Pie and Lowell is examining its client base to determine how profitable its regular clients are. Its analysis indicates that Chico, Incorporated paid $116,000 in fees last year, but cost the firm $124,000 ($106,000 in billable labor, supplies, and copying, and $18,000 in allocated common fixed costs). If Pie and Lowell dropped Chico, Incorporated as a client, and all common fixed costs are unavoidable, how would profit be affected?

 

Multiple Choice Options

  • Increase $8,000

  • Decrease $10,000

  • $0

  • Decrease $116,000

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