Based on the segment income statement below, Chips, Inc. is considering eliminating its Barbecue Division line.

Revenue from Barbecue Division sales	$	520,000
Salaries for Barbecue Division workers		(120,000	)
Direct material		(330,000	)
Sunk costs (equipment depreciation)		(80,000	)
Allocated company-wide facility-sustaining costs		(60,000	)
Net loss	$	(70,000	)

If the Division is eliminated, what is the total amount of avoidable cost?

Multiple Choice

• $450,000.

• $530,000.

• $540,000.

• $580,000.

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2)

A condensed income statement for Gilbert, Inc. follows:

Products	F				G				H				Total
Sales (total)	$	250,000			$	185,000			$	370,000			$	805,000
Total Unit-level Costs		(140,000	)			(161,000	)			(210,000	)			(511,000	)
Contribution Margin		110,000				24,000				160,000				294,000
Company-wide Facility-Level Costs		(26,000	)			(31,000	)			(50,000	)			(107,000	)
Income (Loss)	$	84,000			$	(7,000	)		$	110,000			$	187,000

Gilbert's management is considering whether to eliminate manufacturing product G at the beginning of the next year. The elimination will have no effect on the sales or unit-level costs of products F and H. The change in income that would result from eliminating product G is

rev: 09_13_2021_QC_CS-258022

Multiple Choice

• $31,000 increase

• $24,000 decrease

• $7,000 increase

• $7,000 decrease