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15 March, 10:11

North Division has the following information:

Sales $1180000

Variable expenses 654000

Fixed expenses 620000

If this division is eliminated, the fixed expenses will be allocated to the company's other divisions. What is the incremental effect on net income if the division is dropped?

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Answers (1)
  1. 15 March, 10:18
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    due to elimination

    income will decrease by $526000

    Explanation:

    Given data

    Sales = $1180000

    Variable expenses = $654000

    Fixed expenses = $620000

    to find out

    incremental effect on net income

    solution

    we know here total sale is $1180000 and Variable expenses is $654000

    so contribution if the division is dropped is sales - Variable expenses

    put these value

    contribution = 1180000 - 654000

    contribution = 526000

    so we say that due to elimination

    income will decrease by $526000
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