Question

Fabri Corporation is considering eliminating a department that has an annual contribution margin of $37,000 and $74,000 in annual fixed costs. Of the fixed costs, $18,500 cannot be avoided. The annual financial advantage (disadvantage) for the company of eliminating this department would be:

Answer 1

the annual financial advantage (disadvantage) for the company of eliminating this department is $18,500

Step-by-step explanation:

the computation of the annual financial advantage (disadvantage) for the company of eliminating this department is as follows:

Annual financial Advantage (disadvantage) = $37000 - ($74000 - $18500)

= $37000 - $55,500

= $18,500

Hence, the annual financial advantage (disadvantage) for the company of eliminating this department is $18,500