Question
Soar Incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of $2,500. The division sales for the
Soar Incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of $2,500. The division sales for the year were $1,045,000 and the variable costs were $855,000. The fixed costs of the division were $188,000. If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be: |
a) $56,400 decrease
b) $133,600 decrease
c) $53,900 decrease
d) $190,000 increase
e) $190,000 decrease
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