Granfield Company is considering eliminating its backpack division, which reported a loss for the recent...
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Accounting
Granfield Company is considering eliminating its backpack division, which reported a loss for the recent year of $43,000 as shown below. Segment Income (Loss)
Sales$ 964,000
Variable costs $477,000
Contribution margin $487,000
Fixed costs $530,000
Income (loss)$ (43,000)
If the backpack division is dropped, all $477,000 of its variable costs are avoidable, and $212,000 of its fixed costs are avoidable. The impact on Granfields income from eliminating this business segment would be:
Multiple Choice
$487,000 increase
$275,000 increase
$275,000 decrease
$487,000 decrease
$212,000 increase
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