Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Kim Sunshades Company's western territory's forecasted income statement for the upcoming year is as follows: Sales revenue $850,000 Variable costs (540,000) Contribution margin $310,000 Fixed

Kim Sunshades Company's western territory's forecasted income statement for the upcoming year is as follows:

Sales revenue

$850,000

Variable costs

(540,000)

Contribution margin

$310,000

Fixed costs

(480,000)

Operating loss

$(170,000)

The company's management is considering dropping the western territory and has determined that

80%

of the fixed costs are avoidable. What is the change in the forecasted operating loss for the upcoming year if the western territory is dropped? Assume the company predicts an operating loss across the entire company.

A.

The loss will be increased by

$384,000.

B.

The loss will be reduced by

$384,000.

C.

The loss will be reduced by

$74,000.

D.

The loss will be increased by

$74,000.

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

Students also viewed these Accounting questions