Response:
The avoidable costs linked to the segment amount to $754,000
Detailed explanation:
The costs tied to the segment under consideration for elimination are as follows:
- Advertising costs = $140,000
- Salaries for supervisors = $300,000
- Allocation of costs at the company level = $130,000
- Loss incurred from unsold building (*): $60,000
- Maintenance costs on equipment = $112,000
- Real estate taxes on the building = $12,000
The cumulative cost amounts to $754,000
(*) The earnings from the sold building (book value) = Market value of the building $160,000 - Book value of the building $100,000 = $60,000
