Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Brickman's Pharmacy sells a variety of products. The business is divided into four segments or departments for reporting purposes. The departments and their operating results

Brickman's Pharmacy sells a variety of products. The business is divided into four segments or departments for reporting purposes. The departments and their operating results are as follows:

Pharmaceuticals

Cosmetics

Grocery

Household

Sales Revenue

$ 600,000

$ 300,000

$ 200,000

$ 400,000

Variable Costs

425,000

200,000

170,000

250,000

Contribution Margin

$ 175,000

$ 100,000

$ 30,000

$ 150,000

Fixed Costs

80,000

60,000

40,000

80,000

Net Income (Loss)

$ 95,000

$ 40,000

$ (10,000)

$ 70,000

The fixed costs consist of insurance, property taxes, interest, and other costs that will not be eliminated if a department is discontinued. Brickman's management is considering eliminating the grocery department. Assuming sales in the other departments will not be affected by dropping the grocery department, what will be the effect on the company's total operating income?

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

Cost Accounting Foundations and Evolutions

Authors: Michael R. Kinney, Cecily A. Raiborn

8th Edition

9781439044612, 1439044619, 978-1111626822

More Books

Students also viewed these Accounting questions

Question

a. Where is the person employed?

Answered: 1 week ago