A segment of a business reported a contribution margin of $33,000 and controllable fixed costs of
$14,000. If the segment is eliminated, the company-wide net income would be
A)$14,000 higher.
B)$33,000 lower
C)$19,000 lower.
D)$19,000 higher.

Question

Quizplus · Accepted Answer

The segment's contribution margin covers its variable costs and leaves $19,000 ($33,000 - $14,000) to cover other fixed costs and contribute to company-wide net income. Eliminating the segment would result in the loss of the contribution margin and an overall decrease in net income by the same amount ($33,000). Therefore, the company-wide net income would be $19,000 lower.

A Segment of a Business Reported a Contribution Margin of $33,000