Roger Rabbit Enterprises Is Considering Whether to Discontinue a Division

question 22

Multiple Choice

Roger Rabbit Enterprises is considering whether to discontinue a division that generates a total contribution margin of $66,000 per year. Fixed manufacturing overhead allocated to this division is $50,000, of which 19,000 is unavoidable. If Roger Rabbit Enterprises were to eliminate this division, the effect on the company's operating income would be a (n)

• A)increase in total operating income of $35,000.
• B)decrease in total operating income of $35,000.
• C)increase in total operating income of $47,000.
• D)decrease in total operating income of $47,000.