Question

Valdez Company is considering eliminating its kitchen division, which reported an operating loss of $53,000 for the past year
. Multiple Choice Ο $74,200 decrease Ο $265,000 increase Ο $274.200 decrease Ο $74.200 increase Ο $265.000 decrease < Prev 2
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Answer #1

40% of fixed cost will be incurred even if kitchen division is eliminated.

= $318,000 X 40%

= $127,200

Difference = $127,200 - $53,000 = $74,200

Operating income will reduce by $74,200.

1st option.

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