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What would be the effect of the discontinuance

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Reference no: EM132624893

Iya company plans to discontinue a department with the following average monthly operating costs:

Sales                          120,000

Variable cost                70,000

Contribution margin        50,000

Fixed cost                    80,000

Operating loss              (30,000)

If the department is discontinued, 35,000 of the fixed cost could be eliminated.

Problem 1: What would be the effect (increase/decrease) of the discontinuance of the department on Iya Company's pretax profit?

Reference no: EM132624893

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