Dalton Co. follows a policy of allocating all common costs equally among its profit centers. A...

Dalton Co. follows a policy of allocating all common costs equally among its profit centers. A partial responsibility income statement for a typical month is shown below:

	Dalton Co.		Profit Center 1		Profit Center 2		Profit Center 3
Responsibility margins	$	200,000	$	80,000	$	70,000	$	50,000
Common fixed costs	$	165,000	$	55,000	$	55,000	$	55,000
Income from operations	$	35,000	$	25,000	$	15,000	$	(5,000	)

After evaluating these data, Dalton Co. decides to close Profit Center 3. This action eliminates all revenue, variable costs, and fixed costs traceable to Center 3, but eliminates only $35,000 in common fixed costs. Closing Profit Center 3 has no effect upon the responsibility margins of Centers 1 and 2.

Closing Profit Center 3 should cause Dalton's monthly operating income to:

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ekkarill92 answered 1 year ago

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