Consider the Following Portion of a Segmented Income Statement for the Year

question 123

Multiple Choice

Consider the following portion of a segmented income statement for the year just ended. Assume that the fixed expenses of Division X include $30,000 of direct expenses and that the discontinuance of the department will not affect the sales of the other departments nor reduce the common expenses. $\begin{array}{lr}&\text { Division } X\\\text { Sales } & \$ 100,000 \\\text { Variable manufacturing costs } & 60,000 \\\text { Gross profit } & \$ 40,000 \\\text { Fixed expenses (direct and allocated) } & 50,000 \\\text { Operating income (loss) } & \$(10,000) \end{array}$
What would be the effect on the firm's operating income if Division X were discontinued?

• A)increase $10,000
• B)decrease $40,000
• C)decrease $100,000
• D)decrease $10,000

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Definitions:

Operation Indicated

The specific mathematical procedure or action suggested by a problem or equation.

Collect Like Terms

In algebra, to combine terms that have the same variables raised to the same power.

Simplify

To make (something) simpler or easier to understand or do.

Expression

In mathematics, a combination of symbols that represent a quantity or a relationship between quantities.