2C2L FOLLOWING ARE THE OPERATING RESULTS OF THE TWO SEGMENTS OF PARKL...
254.
CSO: 2C2f
LOS: 2C2l
Following are the operating results of the two segments of Parklin Corporation.
Segment A
Segment B
Total
Sales
$10,000
$15,000
$25,000
Variable costs of goods sold
4,000
8,500
12,500
Fixed costs of goods sold
1,500
2,500
4,000
Gross margin
4,500
4,000
8,500
Variable selling and administrative
2,000
3,000
5,000
Fixed selling and administrative
1,500
1,500
3,000
Operating income (loss)
$ 1,000
$ (500)
$ 500
Variable costs of goods sold are directly related to the operating segments. Fixed costs of
goods sold are allocated to each segment based on the number of employees. Fixed
selling and administrative expenses are allocated equally. If Segment B is eliminated,
$1,500 of fixed costs of goods sold would be eliminated. Assuming Segment B is closed,
the effect on operating income would be
a.
an increase of $500.
b.
an increase of $2,000.
c.
a decrease of $2,000.
d.
a decrease of $2,500.