Kline Enterprises, Which Has Three Departments, Recently Reported the Following

question 26

Multiple Choice

Kline Enterprises, which has three departments, recently reported the following results: $\begin{array}{|l|c|c|c|c|}\hline & A&B&C\\\hline \text { Sales revenue } & \$ 12,000 & \mid \$ 48.000 & \mid \$ 40,000 \\\hline \text { Less: Operating costs } & \underline {11.400}& \mid\underline{59.800} &\mid\underline {50.500}\\\hline \text { Operating income (loss) } & \underline{\$ 600} &\mid\underline {\$(11.800) } &\mid \underline{\$(10,500) } \\\hline\end{array}$ The company incurred variable operating costs as well as $25,000 of fixed operating costs. The $25,000 amount was allocated to A, B, and C on the basis of sales revenue and is included in the cost figures noted above. If none of the fixed operating costs can be avoided, which operating loss should be considered first in choosing which department to close?

• A)$600.
• B)$11,800.
• C)$10,500.
• D)$50,500.
• E)$59,800.

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Definitions:

Asset

Resources controlled by a business from which future economic benefits are expected to flow to the business, including both physical items and intangible properties.

Credit

An entry on the right side of a double-entry bookkeeping system that increases liabilities and equity or decreases an asset or expense.

Cash Received

The amount of money received by a company during a period from various sources including operations, investments, and financing.

Customer

An individual or entity that purchases goods or services from a business, essential for the revenue-generating activities of the company.