Department A has a gross profit of $26 000, direct departmental expenses of $9600 and allocated expenses of $17 000 giving a net loss of $600. What would be the effect on the total organisation's profit if Department A was closed?

Question

Quizplus · Accepted Answer

If Department A is closed, its direct departmental expenses of $9600 and allocated expenses of $17 000 would be saved. Therefore, the total organisation's profit would decrease by $9600 + $17 000 = $26 600. This is greater than the net loss of Department A, which is only $600. Therefore, the total organisation's profit would decrease by $26 600 if Department A is closed.

Department a Has a Gross Profit of $26 000, Direct