Determine the amount of avoidable cost associated with the segment.

Solomon 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.
Required


Advertising expense	$	89,000
Supervisory salaries		178,000
Allocation of companywide facility-level costs		54,000
Original cost of building		121,000
Book value of building		54,000
Market value of building		87,000
Maintenance costs on equipment		82,000
Real estate taxes on building		12,000

Solutions

Expert Solution

The cost associated with the segment to be eliminated including:

- Advertising expense $89,000

- Supervisory salaries $178,000

- Allocation of companywide facility-level costs $54,000

- The loss for unsold building (Book value minus market value): $33,000

- Maintenance costs on equipment $82,000

- Real estate taxes on building $12,000

The total cost is $448,000

the amount of avoidable cost associated with the segment is $448,000

Christopher Mann answered 2 years ago

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