(Solved):Fabio Corporation is considering eliminating a department that has a contribution margin of…

 

Question

Fabio Corporation is considering eliminating a department that has a contribution margin of $36,000 and $72,000 in fixed costs. Of the fixed costs, $18,000 cannot be avoided. The effect of eliminating this department on Fabio’s overall net operating income would be:

a) a decrease of $36,000.

b) an increase of $36,000.

c) a decrease of $18,000.

d) an increase of $18,000.

 

EXPERT ANSWER

The effect of eliminating the department on Fabio’s overall net operating income is

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