Multiple Choice
Wightman Industries has two sales territories-East and West.Financial information for the two territories is presented below:
| East | West | |
|---|---|---|
| Sales | $980,000 | $750,000 |
| Direct costs: | ||
| Variable | (343,000) | (225,000) |
| Fixed | (450,000) | (325,000) |
| Allocated common costs | (275,000) | (175,000) |
| Net income (loss) | $(88,000) | $ 25,000 |
Because the company is in a start-up stage,corporate management feels that the East sales territory is creating too much of a cash drain on the company and it should be eliminated.If the East territory is discontinued,one sales manager (whose salary is $40,000 per year) will be relocated to the West territory.By how much would Wightman's income change if the East territory is eliminated?
A) increase by $88,000
B) increase by $48,000
C) decrease by $267,000
D) decrease by $227,000
Correct Answer:
Verified
Correct Answer:
Verified
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