Soar Incorporated Is Considering Eliminating Its Mountain Bike Division,which Reported

question 96

Multiple Choice

Soar Incorporated is considering eliminating its mountain bike division,which reported an operating loss for the recent year of $3,000.The division sales for the year were $1,050,000 and the variable costs were $860,000.The fixed costs of the division were $193,000.If the mountain bike division is dropped,30% of the fixed costs allocated to that division could be eliminated.The impact on operating income for eliminating this business segment would be:

• A)$57,900 decrease
• B)$132,100 decrease
• C)$54,900 decrease
• D)$190,000 increase
• E)$190,000 decrease

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Definitions:

Productivity Growth

An increase in the efficiency of production, often measured as output per unit of input over time.

1990s

A decade characterized by significant technological advancements, economic globalization, the end of the Cold War, and cultural shifts in music, fashion, and entertainment.

1970s

A decade marked by significant social, political, and economic changes around the world, spanning from 1970 to 1979.

Baumol's Disease

A phenomenon in which wages in jobs that have not experienced increases in labor productivity are driven up by wages in jobs that have experienced productivity growth, leading to higher costs in non-productive sectors.