Fabri Corporation is considering eliminating a department that has an annual contribution margin of $31,000 and...
Fabri Corporation is considering eliminating a department that has an annual contribution margin of $31,000 and $62,000 in annual fixed costs. Of the fixed costs, $15,500 cannot be avoided. The annual financial advantage (disadvantage) for the company of eliminating this department would be:
Multiple Choice
-
($31,000)
-
$31,000
-
($15,500)
-
$15,500
Homework Answers
Current net operating income=Contribution margin-Fixed cost
=(31000-62000)=$(31,000)
Unavoidable fixed costs after elimination=($15500)
Hence financial advantage would be =(15500)-(31000)
=$15500
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