Granfield Company Is Considering Eliminating Its Backpack Division,which Reported an Operating

question 111

Multiple Choice

Granfield Company is considering eliminating its backpack division,which reported an operating loss for the recent year of $42,000.The division sales for the year were $960,000 and the variable costs were $475,000.The fixed costs of the division were $527,000.If the backpack division is dropped,40% of the fixed costs allocated to that division could be eliminated.The impact on Granfield's operating income for eliminating this business segment would be:

• A)$485,000 decrease
• B)$210,800 increase
• C)$274,200 decrease
• D)$485,000 increase
• E)$274,200 increase