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Category > Management Posted 17 Dec 2017 My Price 10.00

Should the company eliminate or keep the segment

A company is considering whether to eliminate a segment and has compiled the following information:

 

Proposal Analysis                Total(existing)            Segment(drop)        Proposed(remaining)

Sales ($210/unit)                    $26,250                    $13,125                    $13,125

Variable costs                        $10,500                    $6,300                    $4,200

Contribution margin               $15,750                    $6,825                    $8,925

            

Fixed costs                            $11,100                    $2,250                    $8,850

Net income                            $4,650                    $4,575                    $75  

Should the company eliminate or keep the segment?

    Eliminate the segment since unavoidable expenses are $2,250 of fixed costs

    Keep the segment since the segment's total avoidable expenses are $4,500

    Keep the segment since eliminating it will result in a $4,575 reduction in net income compared to the existing business

    Eliminate the segment since the contribution margin of the segment is $1,725 less than total allocated expenses

 

(please show any calculations/forumulas)

Answers

CourseLover
(12)
Status NEW Posted 17 Dec 2017 09:12 AM My Price 10.00

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