A Study Has Been Conducted to Determine If One of the Departments

Question 29
Multiple Choice

A study has been conducted to determine if one of the departments in Parry Company should be discontinued.The contribution margin in the department is $50,000 per year.Fixed expenses charged to the department are $65,000 per year.It is estimated that $40,000 of these fixed expenses could be eliminated if the department is discontinued.These data indicate that if the department is discontinued,the company's overall net operating income would: A) decrease by $10,000 per year. B) increase by $10,000 per year. C) decrease by $25,000 per year. D) increase by $25,000 per year.