A study has been conducted to determine if one of the departments in Parry Compa

Question

A study has been conducted to determine if one of the departments in Parry Company should be discontinued. The contribution margin in the department is $50,000 per year. Fixed expenses charged to the department are $65,000 per year. It is estimated that $40,000 of these fixed expenses could be eliminated if the department is discontinued. These data indicate that if the department is discontinued, the company's overall net operating income would:

decrease by $10,000 per year
decrease by $15,000 per year
decrease by $20,000 per year
increase by $15,000 per year

Explanation / Answer

If the department is discontinued the overall income will decrease by $10,000 per year

Explanation:

contribution for gone                  $(50,000)

Saving in fixed cost                    $40,000

Net decrease                               ( $10,000)

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.