A division has the following dа ta: Sales $320,000, Variable costs $200,000, and Fixed costs $140,000. If the division were eliminated, the fixed costs would be allocated to other divisions. What the net impact on the company's overall profit if the division is eliminated?

Question

Kaila Davies

Business

12 May, 08:57

A division has the following dа ta: Sales $320,000, Variable costs $200,000, and Fixed costs $140,000. If the division were eliminated, the fixed costs would be allocated to other divisions. What the net impact on the company's overall profit if the division is eliminated?

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Answers (1)

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Jimenez · Answer 1

Effect on income = $120,000 loss

Explanation:

Giving the following information:

Sales $320,000

Variable costs $200,000

Fixed costs $140,000.

None of the fixed costs are avoidable. Therefore, they shouldn't be taken into account to make the decision.

Effect on income = Sales - varaible cost

Effect on income = 320,000 - 200,000 = $120,000 loss