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28 March, 01:20

North Division has the following information: Sales $1250000 Variable expenses 645000 Fixed expenses 620000 If this division is eliminated, the fixed expenses will be allocated to the company's other divisions. What is the incremental effect on net income if the division is dropped?

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  1. 28 March, 03:43
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    Effect on income = $605,000 loss

    Explanation:

    Giving the following information:

    Sales $1250000

    Variable expenses 645000

    Fixed expenses 620000

    Because none of the fixed costs are avoidable, it shouldn't be taken into account.

    The effect on income will be the loss on the positive contribution margin:

    Effect on income = 1,250,000 - 645,000 = $605,000 loss
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Home » Business » North Division has the following information: Sales $1250000 Variable expenses 645000 Fixed expenses 620000 If this division is eliminated, the fixed expenses will be allocated to the company's other divisions.
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