Valber Company is considering eliminating its phone division. The company allocates fixed costs based on sales. If the phone division is dropped, $150,000 of the fixed costs allocated to that division could be eliminated. The impact on Valber's operating income from eliminating the phone division would be: Desktops Laptops Tablets PhonesSales$356,000 $871,500 $694,000 $975,000 Variable costs 201,000 635,000 528,000 795,000 Contribution margin 155,000 236,500 166,000 180,000 Fixed costs 71,200 174,300 138,800 195,000 Net income (loss) 83,800 62,200 27,200 (15,000)
A. $15,000 increase
B. $150,000 decrease
C. $150,000 increase
D. $30,000 increase
E. $30,000 decrease
Answer: E
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