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Anderson Document Services, a document creation and copying company, has two departments, Design and Copying. The company's most recent monthly contribution format income statement follows
Anderson Document Services, a document creation and copying company, has two departments, Design and Copying. The company's most recent monthly contribution format income statement follows Department Total Sales Variable expenses Design Copying $95,000 $30,000 $65,000 58,500 19,500 39,000 Contribution margin 36,500 10,500 26,000 8,100 Fixed expenses 21,600 13,500 Operating income $14.900 (3,000) 17,900 (loss) A study indicates that $5,700 of the fixed expenses being charged to the Design Department are sunk costs or allocated costs that will continue even if the Design Department is dropped. In addition, the elimination of the Design Department would result in a 5% decrease in the sales of the Copying Department. Required: a. If the Design Department is dropped, what will be the effect on the operating income of the company as a whole? Operating income by
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