Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Pumila Zinnia Company has two departments-Department A and Department B. The company's most recent contribution format income statement follows: Sales Variable expenses Contribution margin Fixed
Pumila Zinnia Company has two departments-Department A and Department B. The company's most recent contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Total $ 800,000 320,000 480,000 400,000 $ 80,000 Department Department A B $ 350,000 120,000 230,000 140,000 $ 90,000 $ (10,000) $ 450,000 200,000 250,000 260,000 The company says that $130,000 of the fixed expenses being charged to Department B are sunk costs or allocated costs that will continue if the segment is discontinued. However, if Department B is discontinued the sales in Department A will drop by 9%. What is the financial advantage (disadvantage) of discontinuing Department B? Pumila Zinnia Company has two departments-Department A and Department B. The company's most recent contribution format income statement lollows: The company says that $130,000 of the fixed expenses being charged to Department B are sunk costs or allocated costs that will continue if the segment is discontinued. However, if Department B is discontinued the sales in Department A will drop by 9%. What is the financial advantage (disadvantage) of discontinuing Department B
Pumila Zinnia Company has two departments-Department A and Department B. The company's most recent contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Total $ 800,000 320,000 480,000 400,000 $ 80,000 Department Department A B $ 350,000 120,000 230,000 140,000 $ 90,000 $ (10,000) $ 450,000 200,000 250,000 260,000 The company says that $130,000 of the fixed expenses being charged to Department B are sunk costs or allocated costs that will continue if the segment is discontinued. However, if Department B is discontinued the sales in Department A will drop by 9%. What is the financial advantage (disadvantage) of discontinuing Department B?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started