Question 10 The following information relates to next year\'s projected operatin

Question

Question 10

The following information relates to next year's projected operating results of the Children's Division of Grunge Clothing Corporation:

            
Contribution margin   $   200,000     
Fixed expenses 500,000     
Net operating loss   $   (300,000)

If the Children's Division is eliminated, $170,000 of the above fixed expenses could be avoided. The annual financial advantage (disadvantage) for the company of eliminating this division should be:

      
($300,000)
      
$30,000
      
($30,000)
      
$300,000

Explanation / Answer

Lost Contribution margin -200000 Fixed expenses avoidable 170000 Financial advantage (disadvantage) -30000 Option 3 is correct

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