Answer:
It will be a financial disadvantage for 10,000
the loss will be for 90,000
which is an increase of 10,000 in the department losses.
It is better to continue with the department.
Explanation:
contribution 80,000
fixed cost <u> (160,000)</u>
net loss (80,000)
discontnued department
contribution 0
unavoidable fixed cost <u>(90,000)</u>
net loss (90,000)
the consequence of eliminating the department will be comparing both result
discontinued result - current result
(-90,000) - (-80,000) = -10,000
It will be a financial disadvantage for 10,000
It is better for the company to keep the department active.
