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Leslie's Sunglass Company's western territory's forecasted income statement for the upcoming year ...

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Leslie's Sunglass Company's western territory's forecasted income statement for the upcoming year ...

Leslie's Sunglass Company's western territory's forecasted income statement for the upcoming year is as follows:

Sales revenue   $850,000
Variable costs   (520,000)
Contribution margin   $330,000
Fixed costs   (480,000)
Operating loss   $(150,000)

The company's management is considering dropping the western territory and has determined that $310,000 of the fixed expenses is avoidable. What is the change in Leslie's Sunglass Company's forecasted operating for the upcoming year if the western territory is dropped? Assume the company predicts an operating loss across the entire company.
A) Operating loss will increase by $20,000.
B) Operating profit will increase by $330,000.
C) Operating profit will decrease by $330,000.
D) Operating loss will decrease by $20,000.

Textbook

Horngren's Financial & Managerial Accounting, The Financial Chapters

Edition: 5^th

Authors: Miller-Nobles, Mattison, Matsumura

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