The following information relates to next year's projected operating results of the Consumer Division of Xampa Corporation: If the Consumer Division is eliminated, $1,600,000 of the above fixed expenses could be avoided. What will be the effect on Xampa's profit next year if Consumer Division is eliminated?
A)$300,000 increase
B)$300,000 increase.
C)$200,000 decrease
D)$200,000 increase

Question

The following information relates to next year's projected operating results of the Consumer Division of Xampa Corporation:  If the Consumer Division is eliminated, $1,600,000 of the above fixed expenses could be avoided. What will be the effect on Xampa's profit next year if Consumer Division is eliminated?
A)$300,000 increase 
B)$300,000 increase. 
C)$200,000 decrease 
D)$200,000 increase

Quizplus · Accepted Answer

Eliminating the Consumer Division would result in avoiding $1,600,000 of fixed expenses. Thus, Xampa's profit would decrease by $1,600,000 if the division is eliminated.

The Following Information Relates to Next Year's Projected Operating Results