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Valdez Company is considering eliminating its kitchen division, which reported an operating loss of $63,000 for the past year. Kitchen division sales for the year
Valdez Company is considering eliminating its kitchen division, which reported an operating loss of $63,000 for the past year. Kitchen division sales for the year were $1,140,000, and its variable costs were $785,000. The fixed costs of the division were $328,000. If the kitchen division is dropped, 70% of the fixed costs allocated to it could be eliminated. The impact on Valdez's operating income from eliminating this business segment would be: Multiple Choice $265,000 decrease $125,400 decrease $125,400 Increase $265,000 Increase $409,900 decrease
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