Question: #3) Granfield Company is considering eliminating its backpack division, which reported an operating loss for the recent year of $42,600. The division sales for the

#3) Granfield Company is considering eliminating its backpack division, which reported an operating loss for the recent year of $42,600. The division sales for the year were $971,400 and the variable costs were $481,000. The fixed costs of the division were $533,000. If the backpack division is dropped, 40% of the fixed costs allocated to that division could be eliminated. The impact on Granfield's operating income for eliminating this business segment would be:

$277,200 increase

$490,400 decrease

$213,200 increase

$277,200 decrease

$490,400 increase

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