A segment of a business reported a contribution margin of $33,000 and common costs of $11,000. If the segment is eliminated, the company-wide net income would be
A)$11,000 higher.
B)$33,000 lower.
C)$33,000 higher.
D)$22,000 higher.

Question

Quizplus · Accepted Answer

If the segment is eliminated, the contribution margin of $33,000 will be lost, but the common costs of $11,000 will be saved. This means that the company-wide net income will decrease by $33,000 (the contribution margin lost) - $11,000 (the common costs saved) = $22,000. Therefore, the correct answer is B.

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