102

Soar Incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of $5,000. The division sales for the year were $1,059,000 and the variable costs were $862,000. The fixed costs of the division were $202,000. If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be:

Multiple Choice

• $60,600 decrease

• $136,400 decrease

• $55,600 decrease

• $197,000 increase

• $197,000 decrease