Reference no: EM13144608
Mars Corporation has three departments. Condensed income statement data are as follows:
Department A Department B Department C Total Sales
$300,000 $280,000 $120,000 $700,000
Variable Expenses
160,000 175,000 105,000 440,000
Contribution Margin
140,000 105,000 15,000 260,000
Fixed Expenses
65,000 35,000 40,000 140,000
Net Income
$75,000 $70,000 $(25,000) $120,000
If Department C is discontinued, fixed expenses would drop $24,000 since the departmental supervisor would leave; the remaining fixed expenses would continue. Sales in Department A would drop 5%; Department B would be unaffected.
Required:
Should Department C be discontinued? Explain fully and show your computations.
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