Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume 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

image text in transcribed

Assume 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) Department Department Total $ 800,000 A B $ 350,000 $ 450,000 320,000 120,000 200,000 480,000 400,000 230,000 250,000 140,000 260,000 $ 80,000 $ 90,000 $ (10,000) The company says that $130,000 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 10%. What is the financial advantage (disadvantage) of discontinuing Department B? Multiple Choice: $(140,000) $(144,000)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Accounting

Authors: Earl K. Stice, James D. Stice

18th edition

538479736, 978-1111534783, 1111534780, 978-0538479738

More Books

Students also viewed these Accounting questions

Question

What background experience do you have?

Answered: 1 week ago