Flower Enterprises Inc. expects its three departments to yield the following inc

Question

Flower Enterprises Inc. expects its three departments to yield the following income for next year.
Sales Dept. F Dept. G Dept. H
Expenses $9,000 $10,000 $8,000
Avoidable 3,000 2,000 5,000
Unavoidable 4,000 6,000 1,000
Total expenses 7,000 8,000 6,000
Net income(loss) $2,000 $2,000 $2,000

Which of the following statements is true regarding Flower's business segments?
If Dept. F is eliminated, overall profit will decline $5,000.
Overall profit will decline by $2,000 if any one of these segments is eliminated.
If Dept. G is eliminated, overall profit will decline $8,000.
If Dept. H is eliminated, overall profit will increase $3,000.
Eliminating Dept. H will reduce overall profit more than eliminating Dept. F.

Explanation / Answer

Answer: If Dept. G is eliminated, oerall profit will decline $8,000. Because if Dept G is eliminated, they will lose 10,000-2,000 = 8,000

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