Question 23

Bounce House Inc is considering dropping its water toy department due to continued net operating losses. Results for the most recent year for the water toy department is shown below: Description Amount Sales (5,000 units) $75,000 Variable expenses $50,000 Contribution margin $25,000 Fixed expenses $40,000 Net operating loss ($15,000) If the water toy department were discontinued, the company would still incur $12,000 per year of fixed costs. The remainder of the fixed costs are avoidable. The annual financial advantage (disadvantage) for the company from discontinuing the production and sales of the water toy department would be: O A. $3,000 disadvantage B. $3,000 advantage C. $13,000 disadvantage D. $13,000 advantage