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 were discontinued,the company's overall operating income per year would change by how much?
A) An increase of $10,000.
B) A decrease of $10,000.
C) An increase of $25,000.
D) A decrease of $25,000.

Question

Quizplus · Accepted Answer

If the department is discontinued, the company would lose the $50,000 contribution margin but save $40,000 in fixed expenses, resulting in a net decrease of $10,000 in operating income.

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