A segment has the following data: $$\begin{array} { l r }
\text { Sales } & \$ 630,000 \
\text { Variable costs } & 336,000 \
\text { Fixed costs } & 325,500
\end{array}$$ What will be the incremental effect on net income if this segment is eliminated,assuming the fixed costs will be allocated to profitable segments?
A) $304,500 increase
B) $304,000 decrease
C) $294,000 decrease
D) $325,500 decrease

Question

A segment has the following data: $$\begin{array} { l r } 
\text { Sales } & \$ 630,000 \
\text { Variable costs } & 336,000 \
\text { Fixed costs } & 325,500
\end{array}$$ What will be the incremental effect on net income if this segment is eliminated,assuming the fixed costs will be allocated to profitable segments?
A) $304,500 increase
B) $304,000 decrease
C) $294,000 decrease
D) $325,500 decrease

Quizplus · Accepted Answer

If the segment is eliminated, the contribution margin (Sales - Variable Costs) of $294,000 will be lost, leading to a decrease in net income by that amount. Fixed costs will still be incurred as they are allocated to other segments.

A Segment Has the Following Data Sales $630,000 Variable costs 336,000 Fixed costs 325,500\begin{array} { l r } \text { Sales } & \$ 630,000 \\\text { Variable costs } & 336,000 \\\text { Fixed costs } & 325,500\end{array} Sales Variable costs Fixed costs ​$630,000336,000325,500​

A Segment Has the Following Data $\begin{array} { l r } \text { Sales } & \$ 630,000 \\\text { Variable costs } & 336,000 \\\text { Fixed costs } & 325,500\end{array}$