Granfield Company is considering eliminating its backpack division, which reported an operating loss for the recent year of $43,000

Marketing Dec 21, 2020

Granfield Company is considering eliminating its backpack division, which reported an operating loss for the recent year of $43,000. The division sales for the year were $979,000 and the variable costs were $485,000. The fixed costs of the division were $537,000. If the backpack division is dropped, 40% of the fixed costs allocated to that division could be eliminated. The impact on Granfield's operating income for eliminating this business segment would be:

a. $279,200 increase

b. $494,000 decrease

c. $214,800 increase

d. $279,200 decrease

e. $494,000 increase

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