Managers are evaluating the performance of Benson Company's six divisions. The managers are considering discontinuing its Mason Division because it is currently operating at a loss. Below is its cost and profit information: The Other Five Divisions Mason Division Total Sales $1,664,200 $96,200 $1,760,400 Variable Costs $1,178,520 $85,000 $1,263,520 Contribution Margin $485,680 $11,200 $496,880 Fixed Costs $327,940 $35,070 $363,010 Operating Income $157,740 ($23,870) $133,870 If the Mason Division is eliminated, $26,400 of fixed costs will be eliminated. Should the Mason Division be eliminated? A. No, because operating income will decrease by $11,200

B. Yes, because operating income will increase by $23,870

C. No, because operating income will decrease by $96,200

D. Yes, because operating income will increase by $15,200

Question

Nevaeh Chang

Business

21 April, 03:17

Managers are evaluating the performance of Benson Company's six divisions. The managers are considering discontinuing its Mason Division because it is currently operating at a loss. Below is its cost and profit information: The Other Five Divisions Mason Division Total Sales $1,664,200 $96,200 $1,760,400 Variable Costs $1,178,520 $85,000 $1,263,520 Contribution Margin $485,680 $11,200 $496,880 Fixed Costs $327,940 $35,070 $363,010 Operating Income $157,740 ($23,870) $133,870 If the Mason Division is eliminated, $26,400 of fixed costs will be eliminated. Should the Mason Division be eliminated? A. No, because operating income will decrease by $11,200

B. Yes, because operating income will increase by $23,870

C. No, because operating income will decrease by $96,200

D. Yes, because operating income will increase by $15,200

+1

Answers (1)

Know the Answer?

Krystal Velazquez · Answer 1

Option D is the correct answer.

Yes, it should be eliminated. Because operating income will increase by $15,200

Explanation:

Increase (Decrease) in operating income

= Avoidable fixed costs - Contribution margin lost

= 26,400 - 11,200

= $15,200