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What will be the effect on overall company profit of closing

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Reference no: EM132547395

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.

Question 1: 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?

Group of answer choices

Option 1: $10,000 decrease

Option 2: $30,000 decrease

Option 3: $40,000 decrease

Option 4: $40,000 increase

Reference no: EM132547395

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