Fabio Corporation is considering eliminating a department that has a contributio

Question

Fabio Corporation is considering eliminating a department that has a contribution margin of $33,000 and $66,000 in fixed costs. Of the fixed costs, $16,500 cannot be avoided. The effect of eliminating this department on Fabio's overall net operating income would be:

a decrease of $33,000.

an increase of $33,000.

a decrease of $16,500.

an increase of $16,500.

Fabio Corporation is considering eliminating a department that has a contribution margin of $33,000 and $66,000 in fixed costs. Of the fixed costs, $16,500 cannot be avoided. The effect of eliminating this department on Fabio's overall net operating income would be:

Explanation / Answer

an increase of $16,500. If department is eliminated then There will be contribution Lost of          (33,000.00) Savings of Fixed Costs(66,000-16500)          49,500.00 Net Savings or gain= 49500- 33000          16,500.00

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