Author Question: Jerry Mounds, controller for Pearl Distributing, has prepared the following financial information ... (Read 69 times)

Aimless0988 · **on:** Feb 5, 2023

Jerry Mounds, controller for Pearl Distributing, has prepared the following financial information for the most recent period showing profitability the of its three departments:

Department A

Department B

Department C

Sales	$52,000	$18,000	$20,000
Variable expenses	36,000	10,000	14,000
Contribution margin	16,000	8,000	6,000
Fixed expenses:
Factory rent	2,000	1,400	3,200
Depreciation	2,000	600	2,600
Utilities	1,800	1,000	1,200
Total fixed expenses	5,800	3,000	7,000
Operating income	$10,200	$ 5,000	($1,000)

The factory rent of $3,200 assigned to Department C is avoidable if the department is eliminated. Depreciation will remain unchanged if a department is dropped. Discontinuing Department C will reduce the utilities by $600.

Required:

Prepare an analysis showing whether Department C should be eliminated.

heathercab · **Reply #1 on:** Feb 5, 2023

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