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Engel Company Has 3 Divisions: A,B,and C

Question 1

Multiple Choice

Engel Company has 3 divisions: A,B,and C.Division A's income statement shows the following for the year ended December 31:

Sales		$1,500,000
Cost of goods sold		(1,125,000)
Gross profit		$ 375,000
Selling expenses	$125,000
Administrative expenses	350,000	(475,000)
Net loss		$ (100,000)

Cost of goods sold is 80 percent variable and 20 percent fixed.Of the fixed costs,50 percent are avoidable if the division is closed.All of the selling expenses relate to the division and would be eliminated if Division A were eliminated.Of the administrative expenses,85 percent are applied from corporate costs.If Division A were eliminated,Engel's income would

A) increase by $100,000.
B) decrease by $197,500.
C) decrease by $310,000.
D) decrease by $422,500.

Engel Company Has 3 Divisions: A,B,and C

Multiple Choice

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