CAF-5 · Chapter 18 · Question 12 of 20
(Decision Making: Shut Down) Dept Z contribution Rs. 200,000. It is allocated Rs. 280,000 fixed overheads (Rs. 150,000 avoidable). What is the net impact on overall profit if Z is shut down?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Profit will decrease by Rs. 50,000
Explanation
Impact = Contribution lost vs Avoidable Fixed Costs saved = 200,000 lost - 150,000 saved = Rs. 50,000 decrease.
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