Trebecker Construction plans to discontinue its roofing segment which last year generated a contribution margin of $65,000 and incurred $70,000 in fixed costs.If the segment is discontinued, half of the fixed costs will be avoided.What effect is expected to occur to the company's overall profit?

Question

Quizplus · Accepted Answer

Discontinuing the roofing segment will save $65,000 in contribution margin but only half of the $70,000 fixed costs ($35,000) will be avoided. This results in a net decrease of $30,000 ($65,000 - $35,000) in overall profit.

Trebecker Construction Plans to Discontinue Its Roofing Segment Which Last