Question

Manor Company plans to discontinue a department that has a contribution margin of $25,000 and $50,000 in fixed costs. Of the fixed costs, $21,000 cannot be eliminated. The effect on the profit of Manor Company of discontinuing this department would be: Group of answer choices a decrease of $4,000. an increase of $4,000. a decrease of $25,000. an increase of $25,000.

Answer 1

Answer:

an increase of $4,000.

Explanation:

Calculation to what The effect on the profit of Manor Company of discontinuing this department would be:

Effect on the profit=-$25,000 + ($50,000 - $21,000)

Effect on the profit=-$25,000+$29,000

Effect on the profit=An increase of $4,000.

Therefore The effect on the profit of Manor Company of discontinuing this department would be: an increase of $4,000