Cabells,Inc.has two divisions - Electronics and Appliances.The divisions have provided the following financial information:
$$\begin{array}{lrr}
& \underline{\textbf { Electronics }} & \underline{\textbf { Appliances }} \
\text { Sales } & \$ 310,000 & \$ 410,000 \
\text { Variable costs } & 225,000 & 270,000 \
\text { Avoidable fixed costs } & 92,000 & 60,000 \
\text { Common fixed costs } & \underline{35,000} & \underline{35,000} \
\text { Operating income } & \underline{\underline{\$ 42,000}} & \underline{\underline{\$ 45,000}}
\end{array}$$ Cabells' executives are considering the elimination of the Electronics division.If the division is eliminated,the common fixed costs will remain unchanged.Given these data,should the Electronics division be eliminated? Why?

Question

Cabells,Inc.has two divisions - Electronics and Appliances.The divisions have provided the following financial information: 
 $$\begin{array}{lrr} 
& \underline{\textbf { Electronics }} & \underline{\textbf { Appliances }} \
\text { Sales } & \$ 310,000 & \$ 410,000 \
\text { Variable costs } & 225,000 & 270,000 \
\text { Avoidable fixed costs } & 92,000 & 60,000 \
\text { Common fixed costs } & \underline{35,000} & \underline{35,000} \
\text { Operating income } & \underline{\underline{\$ 42,000}} & \underline{\underline{\$ 45,000}}
\end{array}$$ Cabells' executives are considering the elimination of the Electronics division.If the division is eliminated,the common fixed costs will remain unchanged.Given these data,should the Electronics division be eliminated? Why?

Quizplus · Accepted Answer

The Answer of Cabells,Inc.has two divisions - Electronics and Appliances.The divisions have provided the following financial information: 
 $$\begin{array}{lrr} 
& \underline{\textbf { Electronics }} & \underline{\textbf { Appliances }} \
\text { Sales } & \$ 310,000 & \$ 410,000 \
\text { Variable costs } & 225,000 & 270,000 \
\text { Avoidable fixed costs } & 92,000 & 60,000 \
\text { Common fixed costs } & \underline{35,000} & \underline{35,000} \
\text { Operating income } & \underline{\underline{\$ 42,000}} & \underline{\underline{\$ 45,000}}
\end{array}$$ Cabells' executives are considering the elimination of the Electronics division.If the division is eliminated,the common fixed costs will remain unchanged.Given these data,should the Electronics division be eliminated? Why?

Cabells,Inc Cabells' Executives Are Considering the Elimination of the Electronics Division