The internal financial statements of Vera Incorporated show that their beaded purses incurred an operating loss...
The internal financial statements of Vera Incorporated show that
their beaded purses incurred an operating loss in the most recent
year. There were 25,000 purses sold in that year. Selected
financial information about the purse line follows.
| Total sales revenue | $190,000 |
| Variable costs | $91,000 |
| Contribution margin | $99,000 |
| Fixed costs | $101,000 |
| Net operating loss | -$2000 |
If the line of purses were to be discontinued, the company would
avoid $18,000 in fixed costs per year.
If Vera Incorporated were to discontinue the line of purses, the
change in annual operating income would be a(n)
|
increase in total operating income of $2000. |
||
|
increase in total operating income of $81,000. |
||
|
decrease in total operating income of $81,000. |
||
|
decrease in total operating income of $2000. |
Homework Answers
|
Increase (Decrease) In operating income = avoidable fixed costs - Contribution margin lost = 18,000 - 99,000 = (81,000) Option C is the answer |
|
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FirstSecurity First should discontinue the industrial systems
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2.
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