Soar Incorporated Is Considering Eliminating Its Mountain Bike Division, Which

question 12

Multiple Choice

Soar Incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of $3,000. The division sales for the year were $1,050,000 and the variable costs were $860,000. The fixed costs of the division were $193,000. If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be:

• A) $132,100 decrease
• B) $54,900 decrease
• C) $190,000 increase
• D) $57,900 decrease
• E) $190,000 decrease

---

Definitions:

Compensatory Damages

Monetary compensation awarded to a plaintiff to indemnify actual losses, expenses, or harm suffered due to the defendant's wrongful conduct.

Punitive Damages

Monetary compensation awarded to an injured party that goes beyond that which is necessary to compensate for losses and is intended to punish the wrongdoer.

Punitive Damages

Financial compensation awarded to a plaintiff in a lawsuit, exceeding simple compensation and intended to punish the defendant for egregious wrongdoing.

Wealth

A measure of the value of all assets of worth owned by a person, community, company, or country.