Question
The management accountant for the Martino Organics has prepared the following segmented income statement for the most current year. Produce Fish & Meat Sundries Total
The management accountant for the Martino Organics has prepared the following segmented income statement for the most current year.
Produce | Fish & Meat | Sundries | Total | |
Sales | $80,000 | $120,000 | $60,000 | $260,000 |
Variable expenses | 36,000 | 65,000 | 20,000 | 121,000 |
Contribution margin | 44,000 | 55,000 | 40,000 | 139,000 |
Other costs | 18,000 | 21,000 | 8,000 | 47,000 |
Segment margin | 26,000 | 34,000 | 32,000 | 92,000 |
Allocated avoidable costs | 2,000 | 3,000 | 3,000 | 8,000 |
Segment income | 24,000 | 31,000 | 29,000 | 84,000 |
Allocated corporate costs | 7,000 | 7,000 | 7,000 | 21,000 |
Corporate profit | $17,000 | $ 24,000 | $ 22,000 | $ 63,000 |
Assume that the Sundries department has been discontinued and long-term capacity of the company has had time to adjust. The projected long-term effect of this action on annual corporate profits would be a decrease of:
A. | $40,000. | |
B. | $32,000. | |
C. | $29,000. | |
D. | $22,000. |
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