Assume a retailing company has two departments—Department A and Department B. The company’s most recent contribution format income statement follows:

	Total			Department A					Department B
Sales	$	800,000			$	350,000				$	450,000
Variable expenses		320,000				120,000					200,000
Contribution margin		480,000				230,000					250,000
Fixed expenses		400,000				140,000					260,000
Net operating income (loss)	$	80,000			$	90,000				$	(10,000	)

The company says that $130,000 of the fixed expenses being charged to Department B are sunk costs or allocated costs that will continue if the segment is discontinued. However, if Department Bis discontinued the sales in Department A will drop by 7%. What is the financial advantage (disadvantage) of discontinuing Department B?

A) (132000)

B) (156100)

C) (136100)

D) (128000)

Answer rating: 100% (QA)

Calculation of Net operating the discout muuning A Dep 325500 111600 213900 140 000 73... View the full answer