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Accounting - Mars Corporation

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Question

Question;1. Mars Corporation has three departments. Condensed income statement data are as follows:SalesVariable ExpensesContribution MarginFixed ExpensesNet IncomeDepartment A$300,000160,000140,00065,000$75,000Department B$280,000175,000105,00035,000$70,000Department C$120,000105,00015,00040,000$(25,000)Total$700,000440,000260,000140,000$120,000If Department C is discontinued, fixed expenses would drop $24,000 since the departmental supervisorwould leave, the remaining fixed expenses would continue. Sales in Department A would drop 5%,Department B would be unaffected.Required:Should Department C be discontinued? Explain fully and show your computations.

 

Paper#39984 | Written in 18-Jul-2015

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