Purchase Solution

Domino Company's management

Not what you're looking for?

Ask Custom Question

Domino Company's management wants to determine if Division B should be eliminated. The following data are available (in thousands):

Contribution Margin Income Statement
Division A Division B Division C Total

Sales $800 $800 $1,200 $2,800
Less variable costs 560 500 720 1,780
Contribution margin $240 $300 $ 480 $1,020
Less direct fixed costs 140 340 240 720
Segment margin $100 ($ 40) $240 $ 300
Less common fixed costs 180
Operating income $120

A. Assuming all direct fixed costs of Division B are avoidable (traceable), what would be the change in operating income if Division B were eliminated?
B. Assuming one-half of the direct fixed costs of Division B are avoidable, what would be the change in operating income if Division B were eliminated?
C. If Division A's sales increase $80,000, the over all company net income will be?
D. If a promotional program at Division A costing $25,000 increases sales by $80,000, Should they go with the promotional program?

Purchase this Solution

Solution Summary

This solution is comprised of a detailed explanation to answer the followings: -
A. Assuming all direct fixed costs of Division B are avoidable (traceable), what would be the change in operating income if Division B were eliminated?
B. Assuming one-half of the direct fixed costs of Division B are avoidable, what would be the change in operating income if Division B were eliminated?
C. If Division A's sales increase $80,000, the over all company net income will be?
D. If a promotional program at Division A costing $25,000 increases sales by $80,000, Should they go with the promotional program?

Solution Preview

Domino Company's management wants to determine if Division B should be eliminated. The following data are available (in thousands):

Contribution Margin Income Statement
Division A Division B Division C Total

Sales $800 $800 $1,200 $2,800
Less variable costs 560 500 720 1,780
Contribution margin $240 $300 $ 480 $1,020
Less direct fixed costs 140 340 240 720
Segment margin $100 ($ 40) $240 $ 300
Less common fixed costs 180
Operating income $120

A. Assuming all direct fixed costs of Division B are avoidable (traceable), what would be the change in operating income if Division B were eliminated?

If Division B is eliminated and that all direct fixed costs of Division B are
avoidable, there would not be sales, variable costs, and direct fixed costs included in the calculation. Common fixed costs remain the same.

Contribution Margin Income ...

Purchase this Solution


Free BrainMass Quizzes
Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.