A department generates income of $20 000 and has variable costs of $14 000 and avoidable fixed costs of $7500. This indicates that the costs directly attributable to the department exceed its income and the department should be closed.

Question

Quizplus · Accepted Answer

The total costs (variable costs + avoidable fixed costs) are $21,500, which exceed the income of $20,000, indicating a loss and suggesting closure.

A Department Generates Income of $20 000 and Has Variable