Wallen Corporation is considering eliminating a department that has an annual contribution margin of $80,000 and $160,000 in annual fixed costs. Of the fixed costs, $90,000 cannot be avoided. The annual financial advantage (disadvantage) for the company of eliminating this department would be:
A) $10,000
B) ($10,000)
C) $80,000
D) ($80,000)

Question

Quizplus · Accepted Answer

Eliminating the department would save $80,000 in contribution margin but would still incur $90,000 in unavoidable fixed costs, leading to a $10,000 disadvantage.

Wallen Corporation Is Considering Eliminating a Department That Has an Annual