Soar incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of

Question

3 years ago

13

Soar incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of

$3,800. the division sales for the year were $1,058,000 and the variable costs were $868,000. the fixed costs of the division were $201,000. 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:

Business

1 answer:

Strike441 [17] · Answer 1 · 2022-02-05T04:55:26+03:00

Strike441 [17]3 years ago

5 0

I think that the answer would be 30% of the fixed costs for $60,300 plus $3800=64,100 ie including the loss which would be saved if the mountain bike business was eliminated. The $3800 represents the operating loss for the mountain bike business.