Gion Company is considering eliminating its Windows division, which reported a loss for the prior...
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Accounting
Gion Company is considering eliminating its Windows division, which reported a loss for the prior year of $100,000 as shown below.
Segment Income (Loss)
Sales
$ 1,125,000
Variable costs
990,000
Contribution margin
135,000
Fixed costs
235,000
Income (loss)
$ (100,000)
If the Windows division is dropped, all of its variable costs are avoidable, and $152,750 of its fixed costs are avoidable. The impact on Gions operating income from eliminating this business segment would be:
Multiple Choice
$152,750 increase
$17,750 increase
$152,750 decrease
$17,750 decrease
$16,950 decrease
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