Help Save & Exit A company has two departments, Kids and Adults. The company's most recent monthly contribution format income statement follows: 1 01:39:13 Sales Variable expenses Contribution Margin Fixed Expenses Net operating income (los) Total $4,200.000 2.000.000 2,200,000 2.200.000 0 Department Kids Adults $3,000,000 $1,200,000 1.500.000 500.000 1,500,000 700,000 1.300.000 900,000 200,000 (200,000) A study indicates that $300,000 of the fixed expenses being charged to the Adults Department are sunk costs or allocated costs that will continue even if the Adults Department is dropped. In addition, the elimination of the Adults Department will result in a 20% decrease in the sales of the Kids Department. If the Adults Department is dropped, what will be the effect on the net operating income of the company as a whole? Multiple Choice Decrease by $360,000 Decrease by $400,000 Increase by $440,000 Net operating income (loss) 0 200,000 (200,000) 8 01:39:02 A study indicates that $300,000 of the fixed expenses being charged to the Adults Department are sunk costs or allocated costs that will continue even if the Adults Department is dropped. In addition, the elimination of the Adults Department will result in a 20% decrease in the sales of the kids Department. If the Adults Department is dropped, what will be the effect on the net operating income of the company as a whole? Multiple Choice Decrease by $360,000 Decrease by $400,000 Increase by $440,000 Decrease by $440.000 Mc Graw Hill Prev 1 of 13 HE Next >