Question

Since the Rubber Division sustained a loss, the president of Vanikoro is considering the elimination of this division. All of the fixed costs for the division could be eliminated if the division was dropped. If the Rubber Division was dropped at the beginning of last year, how much higher or lower would Vanikoro's total net operating income have been for the year? Group of answer choices

Answer 1

Answer:

Explanation:

Vanikoro Financials.

Post closure of Rubber division, vanikoro's financials will look like this:

Sales 500,000

Variable costs 210,000

Contribution Margin 290,000

Traceable fixed costs 130,000

Segment Margin 160,000

Corporate fixed costs 140,000

Net income $20,000.

Net income pre closure of Rubber division is $50,000

Therefore the net income of the group would have declined by $30,000