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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Definitions:

IQ

An abbreviation for Intelligence Quotient, a theoretical measure of an individual's intelligence level determined through specific standardized tests.

Uncorrelated

Describes two or more variables that do not have any statistical relationship, meaning changes in one do not predict changes in the other.

Correlation Coefficient

A statistical measure that describes the degree to which two variables move in relation to each other.

Strongest Relationship

In statistics and research, the most significant and consistent association between two variables.