Question
Vanity Corporation currently has two divisions which had the following operating results for last year: Cork Division Rubber Division Sales $ 600,000 $ 350,000 Variable
Vanity Corporation currently has two divisions which had the following operating results for last year: Cork Division Rubber Division Sales $ 600,000 $ 350,000 Variable costs 250,000 220,000 Contribution margin 350,000 130,000 Traceable fixed costs 160,000 110,000 Segment margin 190,000 20,000 Allocated common corporate fixed costs 80,000 85,000 Net operating income (loss) $ 110,000 $ (65,000 ) Because the Rubber Division sustained a loss, the president of Vanity is considering the elimination of this division. All of the divisions traceable fixed costs could be avoided if the division was dropped. $45,000 of the allocated common corporate fixed costs could be avoided. If the Rubber Division was dropped at the beginning of last year, the financial advantage (disadvantage) to the company for the year would have been:
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored 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