Fabio Corporation is considering eliminating a department that has a contribution margin of
$25,000 and $75,000 in fixed costs. Of the fixed costs, $19,500 cannot be avoided. The effect of
eliminating this department on Fabio\'s overall net operating income would be:
Fabio Corporation is considering eliminating a department that has a contribution margin of
$25,000 and $75,000 in fixed costs. Of the fixed costs, $19,500 cannot be avoided. The effect of
eliminating this department on Fabio\'s overall net operating income would be:
Solution
Fabio Corporation Details Amt $ Fixed cost before eliminating depratment
75,000 Unavoidable Fixed cost remaining after department elimination 19,500
Fixed cost reduction after department elimination 55,500 Less; Loss of contribution
on department elimination (25,000) Overall effect on net opearting Income
30,500.
Fabio Corporation is considering eliminating a department that has a.pdf
1. Fabio Corporation is considering eliminating a department that has a contribution margin of
$25,000 and $75,000 in fixed costs. Of the fixed costs, $19,500 cannot be avoided. The effect of
eliminating this department on Fabio's overall net operating income would be:
Fabio Corporation is considering eliminating a department that has a contribution margin of
$25,000 and $75,000 in fixed costs. Of the fixed costs, $19,500 cannot be avoided. The effect of
eliminating this department on Fabio's overall net operating income would be:
Solution
Fabio Corporation Details Amt $ Fixed cost before eliminating depratment
75,000 Unavoidable Fixed cost remaining after department elimination 19,500
Fixed cost reduction after department elimination 55,500 Less; Loss of contribution
on department elimination (25,000) Overall effect on net opearting Income
30,500
