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

question 103

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. Division X
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:

Credit Total

The sum of all credits entered into an accounting system during a specific period.

Net Income

The total earnings of a company after subtracting all expenses, taxes, and costs, also known as the bottom line.

End-of-Period Spreadsheet

A financial summary prepared at the close of an accounting period, emphasizing the consolidation and reporting of financial results and activities.

Depreciation Expense

Distributing the expense of a physical asset across its lifespan, representing the reduction in its worth as time progresses.