Consider the Following Portion of a Segmented Income Statement for the Year

question 62

Multiple Choice

Consider the following portion of a segmented income statement for the year just ended.Assume that the fixed expenses of Division X include $30,000 of direct expenses and that the discontinuance of the department will not affect the sales of the other departments nor reduce the common expenses. What would be the effect on the firm's operating income if Division X were discontinued?

• A) increase $10,000
• B) decrease $40,000
• C) decrease $100,000
• D) decrease $10,000

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Definitions:

Immaterial Variances

Minor variances in accounting that are not significant enough to affect decision-making processes.