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Question - The management of Bernese Company is considering whether one of the department's in its retail stores should be eliminated. The contribution margin in the department is $150,000 per year. Fixed expenses allocated to the department are $130,000 per year. It is estimated that $120,000 of these fixed expenses will be eliminated if the department is discontinued.
Required -
(a) Which costs, if any, are irrelevant to this decision?
(b) If the department is eliminated, what will be the impact on the company's overall net operating income?
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