Question

In: Accounting

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

Determine the amount of avoidable cost associated with the segment.

       
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 3 years ago
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