Basics of overall net operating income

Reference no: EM13139058

A study has been conducted to determine if one of the departments in Parry Company should be discontinued. The contribution margin in the department is $50,000 per year. Fixed expenses charged to the department are $65,000 per year. It is estimated that $40,000 of these fixed expenses could be eliminated if the department is discontinued. These data indicate that if the department is discontinued, the company's overall net operating income would:

a. decrease by $25,000 per year.

b. increase by $25,000 per year.

c. decrease by $10,000 per year.

d. increase by $10,000 per year.

Reference no: EM13139058

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