Cabby Jewelers has two divisions, the ring division and the necklace division. The ring division has...
Cabby Jewelers has two divisions, the ring division and the
necklace division. The ring division has shown a net loss of
$40,000 for the past year. The necklace division has shown net
income of $10,000 for that same period of time. The ring division
has avoidable expenses of $30,000 and unavoidable expenses of
$20,000. With revenues of $90,000, should the ring division be
eliminated?
A.Yes, revenue exceeds avoidable costs by $60,000.
B.No, revenue exceeds avoidable costs by $60,000.
C.No, revenue exceeds avoidable costs by $70,000.
D.Yes, revenue exceeds avoidable costs by $70,000.
Homework Answers
Ans: (B) No, revenue exceeds avoidable costs by $60,000
Explanation:
| Revenues | $ 90,000 |
| Less: Avoidable Expense | ($30,000) |
|
Revenue exceeds avoidable cost by |
$ 60,000 |
Here,
1) From the above table we conclude that, revenue exceeds avoidable cost by $ 60,000
2) Therfore, Ring division should not be eliminated,
Add Answer to:
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