Soar Incorporated is considering ellminating its mountain bike dlvision, whlch r

Question

Soar Incorporated is considering ellminating its mountain bike dlvision, whlch reported an operating loss for the recent year of $2,600. The division sales for the year were $1,046,000 and the verlable costs were $856,000. The fixed costs of the division were $189,000. If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be elminated. The Impact on operating income for eliminating this business segment would be: O $56.700 decrease O $133.300 decrease O $54,100 decrease O $190.000 increase O $190.000 decrease

Explanation / Answer

Eliminated Sales -1046000 Variable cost 856000 Contribution Margin -190000 Less: Fixed Cost (30% x 189000) 56700 Net Income -133300 Ans B So, net income would be decrease by $133,300

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