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Dalton Company follows a policy of allocating all common costs equally among its profit centers. A partial responsibility income statement for a typical month is
Dalton Company follows a policy of allocating all common costs equally among its profit centers. A partial responsibility income statement for a typical month is shown below: After evaluating these data, Dalton Company decides to close Profit Center 3 . This action eliminates all revenue, variable costs, and fixed costs traceable to Center 3 , but eliminates only $40,600 in common fixed costs. Closing Profit Center 3 has no effect upon the responsibility margins of Centers 1 and 2. Closing Profit Center 3 should cause Dalton's monthly operating income to: Multiple Choice Increase by $4,300. Decrease by $20,700. Increase by $16,400. Decrease by $16,400
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