Question

Fabri Corporation is considering eliminating a department that has an annual contribution margin of $35,000 and $70,000 in annual fixed costs. Of the fixed costs, $25,000 cannot be avoided. The annual financial advantage (disadvantage) for the company of eliminating this department would be:

Answer 1

Answer:

if eliminate department would be saving  $10000

Explanation:

given data

annual contribution margin = $35,000

annual fixed costs = $70,000

solution

we it is Continues than we realize loss that is here

Loss = contribution margin - fixed costs      .......................1

Loss  = $35000 - $70000

Loss  = $35000

and when it is Eliminates fixed cost = 25000 it will occur loss of 25000

so saving will be

Savings = $35000 - $25000

saving = $10000

so if eliminate department would be saving  $10000