The following data is available for Departments A and B: Department A Sales $9,0

Question

The following data is available for Departments A and B:

Department A
Sales $9,000
Variable costs $2,000
Allocated fixed costs $3,000

Department B
Sales $12,000
Variable costs $4,000
Allocated fixed costs $10,000

Based on this data, which of the following statements is true?

a. Dept. B should be expanded because the department could be profitable at a higher volume.
b.Dept. A should be expanded because the department is profitable.
c. Department A and B should both be eliminated.
d. Department B should not be eliminated unless its closing would eliminate more than $8,000 of fixed cost.
pleae show work or explain

Explanation / Answer

answer is D

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