Freemen Company's western territory's forecasted income statement for the upcoming year is as follows: Freemen Company's management is considering dropping the western territory. This move would be financially advantageous only if the company could eliminate $96,000 of fixed costs or more.

Question

Freemen Company's western territory's forecasted income statement for the upcoming year is as follows:  Freemen Company's management is considering dropping the western territory. This move would be financially advantageous only if the company could eliminate $96,000 of fixed costs or more.

Quizplus · Accepted Answer

In order for dropping the western territory to be financially advantageous, the company needs to eliminate $96,000 or more in fixed costs. The income statement shows fixed costs for the western territory at $384,000. If the company can eliminate these fixed costs, they would save more than $96,000 and it would be financially advantageous to drop the territory.

Freemen Company's Western Territory's Forecasted Income Statement for the Upcoming