Closing down divisions. Aristide corporation has four operating divisions. During the first quarter of 2009, the company
Question:
Closing down divisions. Aristide corporation has four operating divisions. During the first quarter of 2009, the company reported total income from operations of $61,000 and the following results for each division:
Further analysis of costs reveals the following percentages of variable costs in each division
Closing down any division would result in savings of 60% of the fixed costs of that division.
Top management is very concerned about the unprofitable divisions (A and D) and is considering shutting them down.
1. Calculate the contribution margin for the two unprofitable divisions (A and D).
2. On the basis of financial considerations alone, should the top management of Aristide shut down Division A? Division D?
3. What other factors should the top management of Aristide consider before making adecision?
Contribution MarginContribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 978-0136126638
13th Edition
Authors: Charles T. Horngren, Srikant M.Dater, George Foster, Madhav