Reference no: EM132528289
The Northern Division of Southwest Clothing Inc. forecasts (has budgeted) the following income statement for the upcoming year:
Sales $850,000
Variable Costs (520,000)
Contribution Margin 330,000
Fixed Costs (480,000)
Operating loss ($150,000)
Question 1: Unfortunately, every other division in the company is also expecting an operating loss for the coming year. The company's management is considering shutting down the Northern Division and has determined that $310,000 of the $480,000 Fixed Costs shown would be eliminated if that happens. If the Northern Division is shutdown, what is the change (impact) in Southwest's forecast operating results?
A. Operating profit will increase by $330,000
B. Operating loss will increase by $20,000
C. Operating profit will decrease by $330,000
D. Operating loss will decrease by $20,000
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