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Question
Granfield Company is considering eliminating its backpack division, which reported an operating loss for the recent year of $42,000. The division sales for the year were $960,000 and the variable costs were $475,000. The fixed costs of the division were $527,000. If the backpack division is dropped, 40% of the fixed costs allocated to that division could be eliminated. The impact on Granfield's operating income for eliminating this business segment would be:A. $485,000 decrease
B. $210,800 increase
C. $274,200 decrease
D. $485,000 increase
E. $274,200 increase
Answer
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Variable manufacturing overhead
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