Cabells, Inc

question 71

Essay

Cabells, Inc.has two divisions - Electronics and Appliances.The divisions have provided the following financial information: Cabells' executives are considering the elimination of the Electronics division.If the division is eliminated, the common fixed costs will remain unchanged.Given these data, should the Electronics division be eliminated? Why?

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Definitions:

Break-even Sales

The amount of revenue needed to cover both the variable and fixed costs of a business, resulting in zero profit or loss.

Variable Cost

Costs that vary directly with the level of production or service delivery, such as raw materials and labor costs.

Fixed Costs

Costs that do not vary with the level of production or sales volume, remaining constant even as production levels change.

Break-even Point

The point at which total costs equal total revenue, resulting in no net loss or gain for the business.