Multiple Choice
Phillips Company has 3 divisions: X,Y,and Z.Division X's income statement shows the following for the year ended December 31:
| Sales | $1,000,000 | |
| Cost of goods sold | (800,000) | |
| Gross profit | $ 200,000 | |
| Selling expenses | $100,000 | |
| Administrative expenses | 250,000 | (350,000) |
| Net loss | $ (150,000) |
Cost of goods sold is 75 percent variable and 25 percent fixed.Of the fixed costs,60 percent are avoidable if the division is closed.All of the selling expenses relate to the division and would be eliminated if Division X were eliminated.Of the administrative expenses,90 percent are applied from corporate costs.If Division X were eliminated,Phillips's income would
A) increase by $150,000.
B) decrease by $ 75,000.
C) decrease by $155,000.
D) decrease by $215,000.
Correct Answer:
Verified
Correct Answer:
Verified
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