Harold Manufacturing has a division that is generating net losses year after year. Below is
some financial information for this division:
Sales
$300,000
Cost of goods sold
210,000
Gross profit
70,000
Operating expenses
115,000
Operating loss
(45,000)
Harold estimates that 30% of the cost of goods sold amount is fixed factory overhead, and 10%
of the operating expenses are fixed. If this division is eliminated, the fixed costs will not be
materially affected.
What is the income (cost) to Harold if he eliminates the division?
a. amount $ type your answer...
b. Income or cost? type your answer...
c. Should Harold eliminate this division? yes, or no? type your answer...
