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Exam CMA-Financial-Planning-Performance-and-Analytics All Questions
Exam CMA-Financial-Planning-Performance-and-Analytics All Questions

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IMA CMA CMA-Financial-Planning-Performance-and-Analytics Question # 7 Topic 1 Discussion

CMA-Financial-Planning-Performance-and-Analytics Exam Topic 1 Question 7 Discussion:
Question #: 7
Topic #: 1

Music Masters Inc. has three departments: Instrument Sales, Music Instruction and Recording Studio The three segments are staffed by different customer service personnel but share space and administrative staff Condensed income statement information follows.

CMA-Financial-Planning-Performance-and-Analytics Question 7

Management wants to eliminate the Recording Studio because of its losses. Because of the configuration of the building it is doubtful the space could be sublet and none of the common fixed costs would be eliminated However, additional space allocated to either Instrument Sales or Music Instruction might increase revenue from those sources In making this decision, all of the following outcomes are correct except.


A.

elimination of the Recording Studio will increase net income by $10,000


B.

elimination of the Recording Studio will decrease net income by $10,000


C.

net income will remain the same if the Recording Studio is eliminated and Music Instruction revenue increases $20,000


D.

net income will increase if the Recording Studio is eliminated and instrument Sales increase $25,000


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