Sammy Company is considering eliminating its commercial division. The company allocates fixed costs based on division sales. If the commercial division is dropped, $100,000 of the fixed costs allocated to it could be eliminated. The impact on Sammy’s operating income from eliminating the commercial division would be: Garden Farm Commercial Sales $ 678,000 $ 920,000 $ 692,000 Variable costs 372,900 414,000 649,800 Contribution margin 305,100 506,000 42,200 Fixed costs 247,200 335,500 252,400 Net income (loss) 57,900 170,500 (210,200 )
Sammy Company is considering eliminating its commercial division. The company allocates fixed costs based on division sales. If the commercial division is dropped, $100,000 of the fixed costs allocated to it could be eliminated. The impact on Sammy’s operating income from eliminating the commercial division would be: Garden Farm Commercial Sales $ 678,000 $ 920,000 $ 692,000 Variable costs 372,900 414,000 649,800 Contribution margin 305,100 506,000 42,200 Fixed costs 247,200 335,500 252,400 Net income (loss) 57,900 170,500 (210,200 )
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Sammy Company is considering eliminating its commercial division. The company allocates fixed costs based on division sales. If the commercial division is dropped, $100,000 of the fixed costs allocated to it could be eliminated. The impact on Sammy’s operating income from eliminating the commercial division would be:
Garden Farm Commercial
Sales $ 678,000 $ 920,000 $ 692,000
Variable costs 372,900 414,000 649,800
Contribution margin 305,100 506,000 42,200
Fixed costs 247,200 335,500 252,400
Net income (loss) 57,900 170,500 (210,200 )
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