Assume a retailing company has two departments-- Department A and Department. The company's most recent...
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Assume a retailing company has two departments-- Department A and Department. The company's most recent contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (lous) Total $800,000 320,000 480,000 400,000 80,000 Department Department 1 $350,000 $450,000 120,000 200.000 230,000 250.000 140,000 260,000 $ 90,000 $(10,000) The company says that $130,000 of the fixed expenses being charged to Department 8 are sunk costs of allocated costs that will continue the segment is discontinued. However, If Department is discontinued the sales in Department A will drop by 6% What is the financial advantage (disadvantage) of discontinuing Department B? Multiple Choice $(124.000) ${128,000)
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