North Division Has the Following Information $\begin{array}{lr}\text { Sales } & \$ 1,200,000 \\\text { Variable expenses } & 640,000 \\\text { Fixed expenses } & 620,000\end{array}$

question 12

Multiple Choice

North Division has the following information: $\begin{array}{lr}\text { Sales } & \$ 1,200,000 \\\text { Variable expenses } & 640,000 \\\text { Fixed expenses } & 620,000\end{array}$ 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?

• A)$60,000 increase
• B)$620,000 decrease
• C)$560,000 decrease
• D)$580,000 increase

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Definitions:

Adjusting Entry

An accounting record created at the closing of a fiscal period to assign revenues and expenses to their respective periods.

Reversing Entry

An accounting entry that is made at the beginning of a period to reverse or cancel out an adjusting entry made in the previous period.

Items Matching

A fundamental accounting principle that mandates the expenses related to revenue are reported in the same period as the revenue itself.

Classified Balance Sheet

A financial statement that groups a company's assets, liabilities, and equity into categorized sections for clearer analysis.