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Brei'El ChyLyne
on Dec 16, 2024

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A study has been conducted to determine if one of the departments in Parry Company should be discontinued. The contribution margin in the department is $40,000 per year. Fixed expenses charged to the department are $65,000 per year. It is estimated that $30,000 of these fixed expenses could be eliminated if the department is discontinued. These data indicate that if the department is discontinued, the company's overall net operating income would:

A) decrease by $25,000 per year.
B) decrease by $15,000 per year.
C) increase by $15,000 per year.
D) increase by $25,000 per year.

Net Operating Income

The income generated from normal business operations after subtracting operating expenses from gross profit.

Fixed Expenses

Costs that do not fluctuate with changes in production level or sales volume, ensuring stability in budget planning.

  • Analyze the effects of discontinuing a department or product line on a company's overall net operating income.
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Jacob SpinaDec 17, 2024
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