Assume a retailing company has two departmentsDepartment A and Department B. The companys most recent contribution format income statement follows:

	Total	Department A	Department B
Sales	$ 800,000	$ 350,000	$ 450,000
Variable expenses	320,000	120,000	200,000
Contribution margin	480,000	230,000	250,000
Fixed expenses	400,000	140,000	260,000
Net operating income (loss)	$ 80,000	$ 90,000	$ (10,000)

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 9%. What is the financial advantage (disadvantage) of discontinuing Department B?

Multiple Choice

• $(136,000)

• $(140,000)

• $(140,700)

• $(120,700)