The Following Information Relates to Next Year's Projected Operating Results

question 178

Multiple Choice

The following information relates to next year's projected operating results of the Children's Division of Grunge Clothing Corporation:
If the Children's Division is eliminated,$170,000 of the above fixed expenses could be avoided.The annual financial advantage (disadvantage) for the company of eliminating this division should be:

• A) ($300,000)
• B) $30,000
• C) ($30,000)
• D) $300,000

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Definitions:

Herfindahl Index

A measure of market concentration that sums the squares of the market shares of all firms within an industry.

Economic Profit

The profit or loss calculated by taking the total revenue of a firm and subtracting all its costs, both direct and indirect.

Market Power

The ability of a firm or group of firms to control prices and total market output, often as a result of monopoly or oligopoly market structures.