Market Inc.has two divisions,Talbot and Heather.Following is the income statement for the past month: What would Market's profit margin be if the Talbot division was dropped and all fixed costs are unavoidable?
A)$500 loss
B)$79,000 loss
C)$33,500 profit
D)$213,000 profit

Question

Market Inc.has two divisions,Talbot and Heather.Following is the income statement for the past month:  What would Market's profit margin be if the Talbot division was dropped and all fixed costs are unavoidable?
A)$500 loss 
B)$79,000 loss 
C)$33,500 profit 
D)$213,000 profit

Quizplus · Accepted Answer

If the Talbot division is dropped, the company will lose $79,000 as Talbot is contributing $79,000 to the overall profit of the company. The fixed costs will still need to be absorbed by the Heather division, which will decrease the profit margin even further. Therefore, the company will incur a loss of $79,000.