Question

Soar Incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of $3,000. The division sales for the year were $1,047,000 and the variable costs were $860,000. The fixed costs of the division were $190,000. If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be: Multiple Choice $187,000 decrease $130,000 decrease $187,000 increase $54,000 decrease $57,000 decrease

Answer 1

The impact on operating income for eliminating this business segment would be:

$54,900 decrease $135,100 decrease $52,900 decrease $190,000.