The Corporation Has Three Departments,Widgets,Ridgets and Digits The Corporation Is Considering Eliminating the Widgets Department

question 38

Multiple Choice

The Corporation has three departments,Widgets,Ridgets and Digits.At the end of the accounting period the following information is available. $\begin{array}{|l|r|r|r|r|}\hline & \text { Widgets } & \text { Ridgets } & \text { Digits } & \text { Total } \\\hline \text { Net Sales } & \$ 5000 & \$ 9000 & \$ 6000 & \$ 20000 \\\hline \text { Cost of sales }& \underline{3000} & \underline{400} & \underline{2400} & \underline{900} \\\hline \text { Gross Profit }&\$ 2000 & 4500 & \$ 3600 & \$ 10100 \\\hline \text { Direct Operating Exps }&\underline{500} & \underline{1000} & \underline{1500} & {3000} \\\hline \text { Departmental Margin }&1500 & \$ 3500 & \$ 2100 & \$ 7100 \\\hline \text { Indirect Operating Exps }&& & & \underline{3000} \\\hline \text { Profit }&& & & \$ 4100 \\\hline \end{array}$ The Corporation is considering eliminating the Widgets department.What will be the change in The Corporation's profit if the Widgets department is eliminated? Assume that all indirect expenses are unavoidable and that all other circumstances are held constant.

• A)$500 fall
• B)$1500 fall
• C)$1000 fall
• D)$1500 increase

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Definitions:

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