Sammy Company is considering eliminating its Commercial division. The company allocates fixed costs based on division sales. If the Commercial division is dropped, all of its variable costs are avoidable, and $120,000 of its fixed costs are avoidable. The impact on Sammy's operating income from eliminating the commercial division would be: Sales Variable costs Contribution margin Fixed costs Net income (loss) Multiple Choice O O $30,000 increase Multiple Choice O $37,800 increase $37,800 decrease $30,000 increase $37,800 increase $37,800 decrease $10.000 increase $3,200 decrease Garden Farm $ 683,000 $ 980,000 392,900 434,000 290, 100 546,000 267,200 355,500 22,900 190,500 Commercial $ 752,000 669,800 82,200 325,400 (243,200)
Sammy Company is considering eliminating its Commercial division. The company allocates fixed costs based on division sales. If the Commercial division is dropped, all of its variable costs are avoidable, and $120,000 of its fixed costs are avoidable. The impact on Sammy's operating income from eliminating the commercial division would be: Sales Variable costs Contribution margin Fixed costs Net income (loss) Multiple Choice O O $30,000 increase Multiple Choice O $37,800 increase $37,800 decrease $30,000 increase $37,800 increase $37,800 decrease $10.000 increase $3,200 decrease Garden Farm $ 683,000 $ 980,000 392,900 434,000 290, 100 546,000 267,200 355,500 22,900 190,500 Commercial $ 752,000 669,800 82,200 325,400 (243,200)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Sammy Company is considering eliminating its Commercial division. The company allocates fixed costs based on division sales. If the Commercial
division is dropped, all of its variable costs are avoidable, and $120,000 of its fixed costs are avoidable. The impact on Sammy's operating income
from eliminating the commercial division would be:
Sales
Variable costs
Contribution margin
Fixed costs
Net income (loss)
Multiple Choice
O
$30,000 increase
O
$37,800 increase
Multiple Choice
$37,800 decrease
$30,000 increase
$37,800 increase
$37,800 decrease
$10,000 increase
$3,200 decrease
Garden
$ 683,000
392,900
290,100
267,200
22,900
Farm
$ 980,000
434,000
546,000
355,500
190,500
Commercial
$ 752,000
669,800
82,200
325,400
(243,200)
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