Fabri Corporation is considering eliminating a department that has an annual contribution margin of $35,000 and $70,000 in annual fixed costs. Of the fixed costs, $25,000 cannot be avoided. The annual financial advantage (disadvantage) for the company of eliminating this department would be:

Question

Business

Tessa Mckenzie

14 May, 18:14

Fabri Corporation is considering eliminating a department that has an annual contribution margin of $35,000 and $70,000 in annual fixed costs. Of the fixed costs, $25,000 cannot be avoided. The annual financial advantage (disadvantage) for the company of eliminating this department would be:

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Answers (1)

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Jamari Wiggins · Answer 1

if eliminate department would be saving $10000

Explanation:

given data

annual contribution margin = $35,000

annual fixed costs = $70,000

solution

we it is Continues than we realize loss that is here

Loss = contribution margin - fixed costs ... 1

Loss = $35000 - $70000

Loss = $35000

and when it is Eliminates fixed cost = 25000 it will occur loss of 25000

so saving will be

Savings = $35000 - $25000

saving = $10000

so if eliminate department would be saving $10000