A Portion of the Divisional Income Statement for the Year

question 4

Essay

A portion of the divisional income statement for the year just ended is presented below in a condensed form. $$\begin{array} { l r } & \text { Department F } \\\text { Net sales } & \$ 93,800 \\\text { Cost of goods sold } & 72,400 \\\text { Gross profit } & \$ 21,400 \\\text { Operating expenses } & 28,900 \\\text { Loss from operations } & \$ ( 7,500 ) \\\hline\end{array}$$ ​
The operating expenses of Department F include $16,000 for direct expenses.
It is estimated that the discontinuance of Department F would not have affected the sales of the other departments nor have reduced the indirect expenses of the business.Assuming the accuracy of these estimates, determine the effect (increase or decrease and the amount) on the operating income of the business if Department F had been discontinued.

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Definitions:

High Pressure

A condition where the force applied over a surface area is greater than the standard atmospheric pressure at sea level.

Low Temperature

A condition or state in which the thermal energy is minimal in comparison to a given reference point.

Metamorphism

The process by which the mineralogical and structural characteristics of rocks are changed by high temperature and pressure within the Earth.

Strike-Slip Fault

A type of fault where two blocks of the Earth's crust slide past each other horizontally along the fault plane.