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)
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
$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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