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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, all of its variable costs are avoidable, and $116,000 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) Garden $ 675,000 388,900 286, 100 263,200 22,900 Farm $ 968,000 430,000 538,000 351, 500 186,500 Commercial $ 740,000 665,800 74,200 311,400 (237,200)

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 $116,000 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) Garden $ 675,000 388,900 286, 100 263,200 22,900 Farm $ 968,000 430,000 538,000 351, 500 186,500 Commercial $ 740,000 665,800 74,200 311,400 (237,200)

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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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 $116,000 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) Garden $ 675,000 388,900 286, 100 263, 200 22,900 Farm $ 968,000 430,000 538,000 351,500 186,500 Commercial $ 740,000 665,800 74,200 311,400 (237,200)
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 $116,000 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) Garden $ 675,000 388,900 286, 100 263, 200 22,900 Farm $ 968,000 430,000 538,000 351,500 186,500 Commercial $ 740,000 665,800 74,200 311,400 (237,200)
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