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The Boot Department at the Omaha Department Store is being considered for closure. The following...

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Accounting

The Boot Department at the Omaha Department Store is being considered for closure. The following information relates to boot activity:

Sales revenue $ 350,000
Variable costs:
Cost of goods sold 280,000
Sales commissions 30,000
Fixed operating costs 90,000

If 70% of the fixed operating costs are avoidable, should the Boot Department be closed?

Multiple Choice

  • Yes, Omaha would be better off by $23,000.

  • Yes, Omaha would be better off by $50,000.

  • No, Omaha would be worse off by $13,000.

  • No, Omaha would be worse off by $40,000.

  • None of the answers is correct.

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