Question

ased on the segment income statement below, Chips, Inc. is considering eliminating its Barbecue Division line. Revenue from Barbecue Division sales $ 528,000 Salaries for Barbecue Division workers (128,000 ) Direct material (342,000 ) Sunk costs (equipment depreciation) (82,000 ) Allocated company-wide facility-sustaining costs (64,000 ) Net loss $ (88,000 ) If the Division is eliminated, what is the total amount of avoidable cost?

Answer 1

the total amount of avoidable cost is $470,000

Step-by-step explanation:

The computation of the total amount of avoidable cost is shown below:

= Salaries for Barbecue Division workers + direct materials

= $128,000 + $342,000

= $470,000

Hence, the total amount of avoidable cost is $470,000

We simply added the above two items