The most recent income statement for the Midwest Branch of Third Financial Bank
ID: 2509196 • Letter: T
Question
The most recent income statement for the Midwest Branch of Third Financial Bank is presented below:
Sales $57,000
Variable costs 31,500
Contribution margin 25,500
Avoidable fixed costs 13,500
Unavoidable fixed costs 18,000
Operating loss $(6,000)
Third Financial Bank is thinking about eliminating the Midwest Branch. If the branch is eliminated, Third Financial Bank's operating income will ________.
A) increase by $6,000
B) increase by $13,500
C) decrease by $12,000
D) decrease by $25,500
Explanation / Answer
Decrease in Operating income=Contribution margin lost-Avoidable fixed costs = 25500-13500 = $12000 Option C decrease by $12,000 is correct