Ron Jensen, the Controller of Inca Industries, Has Prepared an Analysis

question 100

Multiple Choice

Ron Jensen, the controller of Inca Industries, has prepared an analysis to help management determine whether one of Inca's departments should be eliminated.The department's contribution margin is $44,000.The fixed expenses charged to the department total $75,000.Of the fixed expenses, Jensen estimates that $36,000 of those expenses would be eliminated if the department were discontinued.Based on Jensen's analysis, if the department is eliminated, Inca's overall operating income would

• A)increase by $8,000 per year.
• B)decrease by $8,000 per year.
• C)decrease by $31,000 per year.
• D)decrease by $5,000 per year.

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Definitions:

Voluntary Dissolution

The process by which a corporation legally terminates its existence by the decision of its shareholders or board, rather than being forced to do so by a court or creditors.

Absorbed Corporation

An absorbed corporation is one that has been merged into another entity, resulting in the loss of its former separate legal identity.

Surviving Corporation

The entity that continues to exist after a merger, having absorbed another business entity.

Property

Refers to ownership of resources such as land, buildings, or intellectual property.