Sammy Company is considering eliminating its commercial division. The company allocates fixed costs based on division sales. If the commercial division is dropped, $100,000 of the fixed costs allocated to it could be eliminated. The impact on Sammy's operating income from eliminating the commercial division would be:
A) $10,200 decrease
B) $45,000 increase
C) $57,800 increase
D) $15,000 increase
E) $57,800 decrease

Question

Sammy Company is considering eliminating its commercial division. The company allocates fixed costs based on division sales. If the commercial division is dropped, $100,000 of the fixed costs allocated to it could be eliminated. The impact on Sammy's operating income from eliminating the commercial division would be: 
A) $10,200 decrease 
B) $45,000 increase 
C) $57,800 increase 
D) $15,000 increase 
E) $57,800 decrease

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Sammy Company Is Considering Eliminating Its Commercial Division