Granfield Company Is Considering Eliminating Its Backpack Division, Which Reported

question 95

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

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Definitions:

Control Group

In experimental research, a group of subjects that does not receive the experimental treatment and is used as a benchmark to measure how the other tested subjects do.

Treatment Group

In experimental research, it refers to the group of participants who receive the experimental treatment or intervention.

Independent Variable

The variable in an experiment that is manipulated or changed by the researcher to observe its effects.

Experiment

A scientific procedure undertaken to make a discovery, test a hypothesis, or demonstrate a known fact.