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Author Question: Jerry Mounds, controller for Pearl Distributing, has prepared the following financial information ... (Read 70 times)

Aimless0988

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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 ADepartment BDepartment C
Sales$52,000$18,000$20,000
Variable expenses 36,000 10,000 14,000
Contribution margin16,0008,0006,000
Fixed expenses:
  Factory rent2,0001,4003,200
  Depreciation2,0006002,600
  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.


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Marked as best answer by Aimless0988 on Feb 5, 2023

heathercab

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Aimless0988

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Reply 2 on: Feb 5, 2023
Gracias!


Dominic

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Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

 

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