Consider the following portion of a segmented income statement for the year just ended. Assume that the fixed expenses of Division X include $30,000 of direct expenses and that the discontinuance of the department will not affect the sales of the other departments nor reduce the common expenses. What would be the effect on the firm's operating income if Division X were discontinued?
A) increase $10,000
B) decrease $40,000
C) decrease $100,000
D) decrease $10,000

Question

Consider the following portion of a segmented income statement for the year just ended. Assume that the fixed expenses of Division X include $30,000 of direct expenses and that the discontinuance of the department will not affect the sales of the other departments nor reduce the common expenses.  What would be the effect on the firm's operating income if Division X were discontinued?
A) increase $10,000 
B) decrease $40,000 
C) decrease $100,000 
D) decrease $10,000

Quizplus · Accepted Answer

The Answer of Consider the following portion of a segmented income statement for the year just ended. Assume that the fixed expenses of Division X include $30,000 of direct expenses and that the discontinuance of the department will not affect the sales of the other departments nor reduce the common expenses.  What would be the effect on the firm's operating income if Division X were discontinued?
A) increase $10,000 
B) decrease $40,000 
C) decrease $100,000 
D) decrease $10,000

Consider the Following Portion of a Segmented Income Statement for the Year