what would peggy's profit be if the golf club division was dropped and all fixed costs are unavoidable

Question Completion:

Peggy's Golf Equipment, Inc. sells equipment through pro shops at golf courses. Peggy's Golf has two divisions: Golf Clubs and Golf Balls. For    

                                         Golf Clubs     Golf Balls         Total

Total Sales                         $371,000      $375,000    $746,000

Variable Costs                    288,000         148,000    $436,000

Contribution Margin           $83,000      $227,000    $310,000

Fixed Costs (allocated)       122,000          112,000   $234,000

Profit                                  $(39,000)       $115,000     $76,000

What would Peggy's profit be if the Golf Club division was dropped and all fixed costs are unavoidable?

a) $7,000 loss

b) $39,000 profit

c) $76,000 profit

d) $83,000 loss

Peggy's Golf Equipment, Inc.

a) $7,000 loss

Explanation:

a) Data and Calculations:

Peggy's Divisional Income Statement

                                         Golf Clubs     Golf Balls         Total

Total Sales                         $371,000      $375,000    $746,000

Variable Costs                    288,000         148,000    $436,000

Contribution Margin           $83,000      $227,000    $310,000

Fixed Costs (allocated)       122,000          112,000   $234,000

Profit                                  $(39,000)       $115,000     $76,000

Income Statement after dropping the Golf Club Division:

                                             Total

Total Sales                         $375,000

Variable Costs                      148,000

Contribution Margin         $227,000

Fixed Costs (allocated)       234,000

Profit                                     $(7,000)

answer; rapid growth in buyer demand and high buyer switching cost;

answer; ///blank(1); dealers; blank(2); brokers;