Granfield Company Is Considering Eliminating Its Backpack Division, Which Reported

Granfield Company is considering eliminating its backpack division, which reported an operating loss for the recent year of $42,000. The division sales for the year were $960,000 and the variable costs were $475,000. The fixed costs of the division were $527,000. 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) $274,200 decrease
B) $274,200 increase
C) $485,000 increase
D) $485,000 decrease
E) $210,800 increase

Correct Answer:

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