The Dropinsky Company's Management Wants to Determine If Division Y

question 1

Essay

The Dropinsky Company's management wants to determine if Division Y should be eliminated. The following data are available (in thousands).

a. Assuming all direct fixed costs of Division Y are avoidable, what would be the change in operating income if Division Y were eliminated?
b. Assuming one-half of the direct fixed costs of Division Y are avoidable, what would be the change in operating income if Division Y were eliminated?

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