Vanik Corporation currently has two divisions which had the following operating results for last year: Cork DivisionRubber DivisionSales$600,000 350,000 Variable costs 250,000 220,000 Contribution margin 350,000 130,000 Traceable fixed costs 160,000 110,000 Segment margin 190,000 20,000 Allocated common corporate fixed costs 80,000 45,000 Net operating income (loss)$110,000 (25,000)Because the Rubber Division sustained a loss, the president of Vanik is considering the elimination of this division. All of the division's traceable fixed costs could be avoided if the division was dropped. None of the allocated common corporate fixed costs could be avoided. If the Rubber Division was dropped at the beginning of last year, the financial advantage (disadvantage)
to the company for the year would have been:
A. ($20,000)
B. $20,000
C. ($25,000)
D. $25,000
Answer: A
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