Azuki Corporation operates in two sales territories, Urban and Rural. Data concerning last year's operations appear below: Azuki's common fixed expenses were $25,000 last year.
If operations in the Rural Sales Territory would have been discontinued at the beginning of last year, how would this have changed the net operating income of Azuki Corporation as a whole?
A) $5,000 increase
B) $6,000 increase
C) $11,000 increase
D) $24,000 decrease

Question

Azuki Corporation operates in two sales territories, Urban and Rural. Data concerning last year's operations appear below:  Azuki's common fixed expenses were $25,000 last year.
If operations in the Rural Sales Territory would have been discontinued at the beginning of last year, how would this have changed the net operating income of Azuki Corporation as a whole?
A) $5,000 increase 
B) $6,000 increase 
C) $11,000 increase 
D) $24,000 decrease

Quizplus · Accepted Answer

The segment margin is negative $6,000, so dropping this segment should increase net operating income by $6,000.

Azuki Corporation Operates in Two Sales Territories, Urban and Rural