g Wallen Corporation is considering eliminating a department that has an annual contribution margin of $80,000 and $160,000 in annual fixed costs. Of the fixed costs, $90,000 cannot be avoided. The annual financial advantage (disadvantage) for the company of eliminating this department would be: Select one: a. $10,000 b. ($10,000) c. $80,000 d. ($80,000)

Question

Jeffrey Gates

Business

25 July, 07:21

g Wallen Corporation is considering eliminating a department that has an annual contribution margin of $80,000 and $160,000 in annual fixed costs. Of the fixed costs, $90,000 cannot be avoided. The annual financial advantage (disadvantage) for the company of eliminating this department would be: Select one: a. $10,000 b. ($10,000) c. $80,000 d. ($80,000)

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Ethan Paul · Answer 1

Option B is correct one.

($10,000)

Explanation:

Current net income-Contribution margin-Fixed costs

= (80,000-160000) = ($80,00)

Net income avoid elimination=Fixed costs

= ($90,000)

Hence financial advantage = (90,000-80,000) = ($10,000)