Question
Managers are evaluating the performance of Benson Company's six divisions. The managers are considering discontinuing its Mason Division because it is currently operating at a
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Managers are evaluating the performance of Benson Company's six divisions. The managers are considering discontinuing its Mason Division because it is currently operating at a loss. Below is its cost and profit information:
The Other Five Divisions | Mason Division | Total | |
Sales | $1,664,200 | $96,200 | $1,760,400 |
Variable Costs | $1,178,520 | $85,000 | $1,263,520 |
Contribution Margin | $485,680 | $11,200 | $496,880 |
Fixed Costs | $327,940 | $35,070 | $363,010 |
Operating Income | $157,740 | ($23,870) | $133,870 |
If the Mason Division is eliminated, $26,400 of fixed costs will be eliminated. Should the Mason Division be eliminated?
A.
No, because operating income will decrease by $11,200
B.
Yes, because operating income will increase by $23,870
C.
No, because operating income will decrease by $96,200
D.
Yes, because operating income will increase by $15,200
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