ume a retailing company has two departments-Department A and Department B. The company's most recent contribution format income statement follows: Department A $ 450,000 Total $ 800,000 320,000 480,000 $ 350,000 120,000 230,000 200,000 250,000 400,000 140,000 260,000 $ 80,000 $ 90,000 $ (10,000) ales ariable expenses ontribution margin ixed expenses et operating income (loss) company says that $110,000 of the fixed expenses being charged to Department B are sunk costs or allocated costs that will continue if the segment is discontinued. However, if Department B is discontinued the s in Department A will drop by 6%. What is the financial advantage (disadvantage) of discontinuing Department B? Multiple Choice $(133,800) $(128,000) $(113,800) Department B $(124,000)

Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter7: Allocating Costs Of Support Departments And Joint Products
Section: Chapter Questions
Problem 30E: A company uses charging rates to allocate service department costs to the using departments. The...
icon
Related questions
Question
Assume a retailing company has two departments-Department A and Department B. The company's most recent contribution format income statement follows:
Department
A
$ 350,000
120,000
230,000
140,000
Sales
Variable expenses
Contribution margin
Fixed expenses
Net operating income (loss)
Multiple Choice
O $(133,800)
The company says that $110,000 of the fixed expenses being charged to Department B are sunk costs or allocated costs that will continue if the segment is discontinued. However, if Department B is discontinued the
sales in Department A will drop by 6%. What is the financial advantage (disadvantage) of discontinuing Department B?
O $(128,000)
$(113,800)
Total
$ 800,000
320,000
480,000
400,000
$ 80,000
O $(124,000)
Department
B
$ 450,000
200,000
250,000
260,000
$90,000 $ (10,000)
Transcribed Image Text:Assume a retailing company has two departments-Department A and Department B. The company's most recent contribution format income statement follows: Department A $ 350,000 120,000 230,000 140,000 Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Multiple Choice O $(133,800) The company says that $110,000 of the fixed expenses being charged to Department B are sunk costs or allocated costs that will continue if the segment is discontinued. However, if Department B is discontinued the sales in Department A will drop by 6%. What is the financial advantage (disadvantage) of discontinuing Department B? O $(128,000) $(113,800) Total $ 800,000 320,000 480,000 400,000 $ 80,000 O $(124,000) Department B $ 450,000 200,000 250,000 260,000 $90,000 $ (10,000)
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Cost allocation
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser…
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Managerial Accounting: The Cornerstone of Busines…
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Excel Applications for Accounting Principles
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning