Question: A guitar manufacturer is considering eliminating its electric guitar division because its $76,000 expenses are higher than its $72,000 sales. The company reports the following expenses for this division. Should the division be eliminated?
Avoidable Expenses Unavoidable Expenses
Cost of goods sold . . . . . . . . . . . . . . $55,000
Direct expenses . . . . . . . . . . . . . . . . 6,250 $2,250
Indirect expenses . . . . . . . . . . . . . . . 470 3,600
Service department costs . . . . . . . . . 7,000 1,430