Multiple Choice
Calgary Corporation is closing one of its divisions. Operating data on this division follows: Sales $80,000
Variable costs 40,000
Overhead 40,000
Overhead consists of $30,000 in salary and $10,000 for rent and insurance. The salary is for the chief engineer, who will continue to work for Calgary even if the division is closed.
Assuming all overhead costs continue to be incurred even if the division closes, what will be the effect on overall company profits of closing the division?
A) $10,000 decrease
B) $40,000 decrease
C) $40,000 increase
D) $30,000 decrease
Correct Answer:
Verified
Correct Answer:
Verified
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