Question - Grace Sullivan & Company has two sales offices: one located in Portland and one in Portsmouth. The company's records report the following information's:
Portland
Sales $40,000
Direct costs:
Variable 15,000
Fixed 10,000
Portsmouth
Sales: $50,000
Direct Cost:
Variable: $25,000
Fixed 10,000
Management is considering dropping the Portland office.
What will be the resulting operating income if Portland is eliminated and half of its fixed costs are avoidable?