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