Valber Company Is Considering Eliminating Its Phone Division A)$30,000 Increase
B)$150,000 Increase
C)$150,000 Decrease
D)$15,000 Increase
E)$30,000 Decrease

question 41

Multiple Choice

Valber Company is considering eliminating its phone division.The company allocates fixed costs based on sales.If the phone division is dropped,$150,000 of the fixed costs allocated to that division could be eliminated.The impact on Valber's operating income from eliminating the phone division would be: $\begin{array}{lcrrl} & \text { Desktops } & \text { Laptops } & \text { Tablets } & \text { Phones } \\\text { Sales } & \$ 356,000 & \$ 871,500 & \$ 694,000 & \$ 975,000 \\\text { Variable costs } & 201,000 & 635,000 & 528,000 & 795,000\\\text { Contribution margin } & 155,000 & 236,500 & 166,000 & 180,000 \\\text { fixed coats} & 71,200 & 174,300 & 138,800 & 195,000\\\text {net income(loss} &83,800&62,200&27,200&(15,000) \end{array}$

• A)$30,000 increase
• B)$150,000 increase
• C)$150,000 decrease
• D)$15,000 increase
• E)$30,000 decrease

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Definitions:

Finance Company

A financial institution that offers loans, leases, and other financial services to consumers and businesses.

Conditional Sales Contract

An agreement for the purchase of goods that does not fully transfer ownership to the buyer until certain conditions, typically full payment, have been met.

Simple Interest

Interest calculated only on the principal amount, or the initial sum of money borrowed or invested, without compounding.

Finance Company

A business that provides loans to individuals and companies, unlike banks, primary lending revolves around installment credit and financing consumer purchases.