Answer:
The impact on operating income for eliminating this business segment would be $136,700
Explanation:
For computing the eliminating operating income, the equation should be used which is shown below:
= Sales revenue - variable cost - fixed cost
where,
Sales revenue is $1,058,000
variable cost is $861,000
And, the fixed cost is $201,000 out of which 30% is allocated to the eliminated division, So, we have to find only 30% of fixed cost which is equal to
= $201,000 × 30%
= $60,300
Now, apply these values to the above equation which is equal to
= $1,058,000 - $861,000 - $60,300
= $136,700
The operating loss is of no use so it is ignored.
Hence, the impact on operating income for eliminating this business segment would be $136,700
