Swanson Company Has 3 Divisions: X,Y,and Z

question 116

Multiple Choice

Swanson Company has 3 divisions: X,Y,and Z.Division X's income statement shows the following for the year ended December 31: Cost of goods sold is 75 percent variable and 25 percent fixed.Of the fixed costs,60 percent are avoidable if the division is closed.All of the selling expenses relate to the division and would be eliminated if Division X were eliminated.Of the administrative expenses,90 percent are applied from corporate costs.If Division X were eliminated,Swanson's income would

• A)increase by $150,000.
• B)decrease by $ 75,000.
• C)decrease by $155,000.
• D)decrease by $215,000.

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Definitions:

General Partnership

A form of partnership where all partners share unlimited liability for the business's debts and obligations.

Profits

The financial surplus remaining after all expenses, including taxes and operating costs, have been deducted from total revenue.

Management Responsibilities

The duties and obligations that managers have to oversee and guide their organization effectively.

Personal Liability

The legal responsibility of an individual to satisfy debts or obligations from their personal assets.