Variable Costs Contribution Margin Direct fixed expenses Common fixed expenses Total fixed expenses Operating income (loss) 489,500 $247,500 $132,000 82,500 $214,500 $33,000 Select one: 315,700 $38,500 $29,700 33,000 $62,700 $(24,200) 662,200 $279,400 $179,300 103,400 $282,700 $(3,300) DJH is considering eliminating the departments that show losses. Assume that the direct fixed expenses could be avoided if the department is eliminated. What effect would elimination of Department 3 have on DJH's total operating income? a. It would decrease total operating income by $100,100. b. It would increase total operating income by $103,400. c. It would decrease total operating income by $279,400. d. None of these options are correct. e. It would decrease total operating income by $3,300.

Variable Costs Contribution Margin Direct fixed expenses Common fixed expenses Total fixed expenses Operating income (loss) 489,500 $247,500 $132,000 82,500 $214,500 $33,000 Select one: 315,700 $38,500 $29,700 33,000 $62,700 $(24,200) 662,200 $279,400 $179,300 103,400 $282,700 $(3,300) DJH is considering eliminating the departments that show losses. Assume that the direct fixed expenses could be avoided if the department is eliminated. What effect would elimination of Department 3 have on DJH's total operating income? a. It would decrease total operating income by $100,100. b. It would increase total operating income by $103,400. c. It would decrease total operating income by $279,400. d. None of these options are correct. e. It would decrease total operating income by $3,300.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 30E: A company uses charging rates to allocate service department costs to the using departments. The...

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DJH Enterprises has 3 departments. Operating results for 2019 are as follows: Department 1 Department 2 Department 3 Sales $837,500 $402,500 $1,070,000 Variable Costs 556,250 358,750 752,500 Contribution Margin $281,250 $43,750 $317,500 Direct fixed expenses $150,000 $33,750 $203,750 Common fixed expenses 93,750 37,500 117,500 Total fixed expenses $243,750 $71,250 $321,250 Operating income (loss) $37,500 $(27,500) $(3,750) DJH is considering eliminating the departments that show losses. Assume that the direct fixed expenses could be avoided if the department is eliminated. What effect would elimination of Department 3 have on DJH’s total operating income? Select one: a. It would decrease total operating income by $113,750. b. It would decrease total operating income by $317,500. c. None of these options are correct. d. It would increase total operating income by $117,500. e. It would decrease total operating income by $3,750.
DJH Enterprises has 3 departments. Operating results for 2019 are as follows: Department 1 Department 2 Department 3 Sales $938,000 $450,800 $1,198,400 Variable Costs 623,000 401,800 842,800 Contribution Margin $315,000 $49,000 $355,600 Direct fixed expenses $168,000 $37,800 $228,200 Common fixed expenses 105,000 42,000 131,600 Total fixed expenses $273,000 $79,800 $359,800 Operating income (loss) $42,000 $(30,800) $(4,200) DJH is considering eliminating the departments that show losses. Assume that the direct fixed expenses could be avoided if the department is eliminated.What effect would elimination of Department 2 have on DJH’s total operating income? Select one: a. It would increase total operating income by $42,000. b. It would decrease total operating income by $7,000. c. It would decrease total operating income by $49,000. d. It would increase total operating income by $30,800. e. It would decrease total operating income by $11,200.
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