The Shoe Department at the Baton Rouge Department Store is being considered for closure. The following information relates to shoe activity:
|Cost of Goods Sold||$280,000|
|Fixed operating Costs||$90,000|
If 70% of the fixed operating costs are avoidable, should the Shoe Department be closed?
Shutdown or Continue
In relevant costing, we need to take into consideration relevant costs in making decisions for the company.
Answer and Explanation:
Yes. The Shoe department must be closed in order to save $23,000.
|Cost to be saved|
|Cost of sales||280,000|
|Fixed cost (70%)||63,000|
Become a member and unlock all Study Answers
Try it risk-free for 30 daysTry it risk-free
Ask a question
Our experts can answer your tough homework and study questions.Ask a question Ask a question
Learn more about this topic:
from Accounting 301: Applied Managerial AccountingChapter 9 / Lesson 12