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31 December, 14:08

San Ruiz Interiors provides design services to residential and commercial clients. The residential services produce a contribution margin of $450,000 and have traceable fixed operating costs of $480,000. Management is studying whether to drop the residential operation. If closed, the fixed operating costs will fall by $370,000 and San Ruiz' income will:

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  1. 31 December, 14:23
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    If closed the operating income will decrease by 50,000

    Is a better scenario to continue with the residential sercives

    Explanation:

    current scenario:

    contribution margin 450,000

    Fixed Cost 480,000

    net loss 30,000

    drop scenario:

    contribution margin = 0

    fixed cost 450,000-370,000 = 80,000

    net loss (80,000)
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