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A retailing company has two departments-Department A and Department B. The company's most recent contribution format income statement follows: Sales Variable expenses Contribution margin Fixed
A retailing company has two departments-Department A and Department B. The company's most recent contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Total $800,000 320,000 480,000 400,000 $ 80,000 Department A $350,000 120,000 230,000 140,000 $ 90,000 Department B $450,000 200,000 250,000 260,000 $(10,000) The company says that $140,000 of the fixed expenses being charged to Department Bare 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 7%. How much does the company's profit increase or decrease if Department B is discontinued? (if a decrease, the dollar amount is indicated in parentheses, i.e. $ (1,000). Multiple Choice $ (128,000) $ (132,000) $ (146.100) $ 11661001
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