Fabri Corporation is considering eliminating a department that has an annual contribution margin of $32,000 and...
Fabri Corporation is considering eliminating a department that has an annual contribution margin of $32,000 and $64,000 in annual fixed costs. Of the fixed costs, $16,000 cannot be avoided. The annual financial advantage (disadvantage) for the company of eliminating this department would be:
Multiple Choice
-
($32,000)
-
$32,000
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($16,000)
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$16,000
Homework Answers
If the department were eliminated, the company would eliminate the department's negative segment margin of $16,000 and overall net operating income would increase by the same amount $16,000 per year.
Hence the answer is d)
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