Asked by
Diego Anchondo
on Oct 10, 2024Verified
Wallen Corporation is considering eliminating a department that has an annual contribution margin of $80,000 and $160,000 in annual fixed costs.Of the fixed costs, $90,000 cannot be avoided.The annual financial advantage (disadvantage) for the company of eliminating this department would be:
A) $10,000
B) ($10,000)
C) $80,000
D) ($80,000)
Contribution Margin
The amount of revenue from sales that remains after variable costs are subtracted, useful in determining the profitability of individual products or services.
Annual Fixed Costs
The total fixed costs incurred by a business in a year, including rent, salaries, and insurance, which do not vary with production volume.
Financial Advantage
The benefit gained in a financial context that puts an individual, company, or country in a better position than others.
- Evaluate the consequences of ceasing a product line or department on the organization's total net operating income.
Verified Answer
SG
Learning Objectives
- Evaluate the consequences of ceasing a product line or department on the organization's total net operating income.