Clay Inc.has two divisions,Myrtle and Laurel.Following is the income statement for the previous year: What would Clay's profit margin be if the Laurel division was dropped and all fixed costs are unavoidable?

A)$99,625 profit
B)$91,000 profit
C)$384,000 profit
D)$71,000 loss

Question

Clay Inc.has two divisions,Myrtle and Laurel.Following is the income statement for the previous year: What would Clay's profit margin be if the Laurel division was dropped and all fixed costs are unavoidable?

A)$99,625 profit 
B)$91,000 profit 
C)$384,000 profit 
D)$71,000 loss

Quizplus · Accepted Answer

If the Laurel division is dropped, the total revenue would decrease to $435,000 and the total expense would decrease to $506,000. This would result in a loss of $71,000, which is the profit margin for Clay if the Laurel division is dropped.

Clay IncHas Two Divisions,Myrtle and Laurel