Mayfield Retailers Has Departments a and B with Departmental Income

question 15

Multiple Choice

Mayfield Retailers has departments A and B with departmental income statements as follows: $\begin{array}{|l|r|r|}\hline & \text { Department A } & \text { Department B } \\\hline \text { Net sales } & \$ 70000 & \$ 50000 \\\hline \text { Cost of sales } & 30000 & 20000 \\\hline \text { Other Expenses } & 13000 & 31000 \\\hline \text { Profit (Loss) } & \$ 27000 & (\$ 1000) \\\hline\end{array}$ Mayfield is considering eliminating Department B.Of the total 'other expenses' for the two departments of $44 000,$32 000 are fixed general overhead expenses and the rest are variable expenses based on 10% of sales.It is estimated that the elimination of Department B will cause a 10% decrease in the sales of Department A.What will be the profit or loss of Department A after the elimination of Department B?

• A)$16,700 profit
• B)$3,000 profit
• C)$6,000 loss
• D)$2,300 loss

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