Question
A firm has two departments: First Department and Second Department. Firm management is thinking of dropping Second Department. First Department: $109,302 in revenue, $50,274 in
A firm has two departments: First Department and Second Department. Firm management is thinking of dropping Second Department.
First Department: $109,302 in revenue, $50,274 in variable costs, and $20,369 in fixed costs. Second Department: $210,423 in revenue, $193,897 in variable costs, and $28,095 in fixed costs.
However, $9,362 of fixed costs from Second Department cannot be avoided if the firm drops it. Also, dropping Second Department will reduce sales for First Department by $6,442 (assume no change in First Department variable costs for this problem).
How much more (or less) profitable is it to keep Second Department than to drop it?
(Your answer will be a negative number if it is less profitable to keep Second Department than to drop it.)
Round to whole dollars. Enter your answer as a whole number without dollar signs, commas, or decimals.
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