Division K has a contribution margin of $100 000 and fixed costs traceable to the division of $25 000 mean it is making a divisional margin of $75 000.However after the allocation of $90 000 of common costs,which would not be saved if the division were to be closed,it is making a loss of $15 000.Assuming all other factors are equal,if the division were closed the effect on the overall profit of the organisation would be:
A)an increase of $15 000
B)an increase of $75 000
C)a decrease of $90 000
D)a decrease of $75 000

Question

Quizplus · Accepted Answer

If the division is closed, the organization would lose the divisional margin of $75,000, as the common costs of $90,000 would remain unchanged.

Division K Has a Contribution Margin of $100 000 and Fixed