Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

DJH Enterprises has 3 departments. Operating results for 2 0 1 9 are as follows: Department 1 Department 2 Department 3 Sales $ 9 3

DJH Enterprises has 3 departments. Operating results for 2019 are as follows:
Department 1 Department 2 Department 3
Sales $938,000 $450,800 $1,198,400
Variable Costs 623,000401,800842,800
Contribution Margin $315,000 $49,000 $355,600
Direct fixed expenses $168,000 $37,800 $228,200
Common fixed expenses 105,00042,000131,600
Total fixed expenses $273,000 $79,800 $359,800
Operating income (loss) $42,000 $(30,800) $(4,200)
DJH is considering eliminating the departments that show losses. Assume that the direct fixed expenses could be avoided if the department is eliminated.
What effect would elimination of Department 2 have on DJHs total operating income?
Select one:
a. It would increase total operating income by $42,000.
b. It would decrease total operating income by $7,000.
c. It would decrease total operating income by $49,000.
d. It would increase total operating income by $30,800.
e. It would decrease total operating income by $11,200.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Holt McDougal Larson Geometry

Authors: Ron Larson, Laurie Boswell, Timothy D. Kanold, Lee Stiff

1st Edition

0547315171, 978-0547315171

Students also viewed these Accounting questions