Department H has a gross profit of $48 000, direct departmental expenses of $33 500 and allocated expenses of $18 200 giving a net loss of $3 700. What would be the effect on the total organisation's profit if Department H was closed?

Question

Quizplus · Accepted Answer

Closing Department H would eliminate its gross profit of $48,000 but also remove its direct expenses of $33,500 and allocated expenses of $18,200. The net effect would be a decrease in total profits by the amount of the net loss, which is $3,700, plus the allocated expenses of $18,200, totaling a decrease of $14,500 in profits.

Department H Has a Gross Profit of $48 000, Direct