Use the information below to answer the following questions.
Travel Made Easy Ltd provides three services: International travel, Interstate travel, and Holiday Packages. The results for the year were as follows:
The fixed costs have been shared equally between the three functions.
-Refer to the table above. Management is contemplating closing the Holiday Packages service; this would involve a cost saving of $40,000 per annum, namely the variable costs. The fixed costs are not expected to change. The best advice to management is:
A) do not close the service, because profit would decrease by $90,000.
B) close the service, and the business would make a profit of $110,000.
C) close the service and save $40,000.
D) do not close the service, because profit would decrease by $60,000.
Correct Answer:
Verified
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