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Rooney Corporation is considering the elimination of one of its segments. The segment incurs the following fixed costs. If the segment is eliminated, the building it uses will be sold. Advertising expense
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Rooney Corporation is considering the elimination of one of its segments. The segment incurs the following fixed costs. If the segment is eliminated, the building it uses will be sold. Advertising expense $ 81,000 Supervisory salaries 170,000 Allocation of companywide facility-level costs 65,000 Original cost of building 118,000 Book value of building 62,000 Market value of building 84,000 Maintenance costs on equipment 73,000 Real estate taxes on building 12,000 Required Determine the amount of avoidable cost associated with the segment.

User Ferry To
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12 votes

Answer: $420000

Step-by-step explanation:

The amount of avoidable cost associated with the segment will be calculated thus:

Advertising expense = $81000

Add: Supervisory sales = $170000

Add: Market value of the building = $84000

Add: Maintenance costs on equipment = $73000

Add: Real estate taxes on the building = $12000

Avoidable cost = $420000

User Awah Teh
by
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