An international company has the following profitability analysis of its three divisions: Division A Division B Division
Question:
An international company has the following profitability analysis of its three divisions:
Division A | Division B | Division C | |||||||||
Revenues | $ | 5,000,000 | $ | 10,000,000 | $ | 3,000,000 | |||||
Commissions | (1,000,000 | ) | (2,000,000 | ) | (600,000 | ) | |||||
Payments | (3,000,000 | ) | (7,300,000 | ) | (2,000,000 | ) | |||||
Common Costs | (500,000 | ) | (500,000 | ) | (500,000 | ) | |||||
Profit | $ | 500,000 | $ | 200,000 | $ | (100,000 | ) |
The common costs are fixed, are distributed equally among the divisions, and are not avoidable if one of the divisions is dropped (they will be reallocated to the remaining divisions).
What is the profitability of the remaining division if all divisions with losses are dropped (enter negative sign before the number for loss)? Assume that at least one division has to continue if the company has to be in existence.
Managerial Accounting Tools for business decision making
ISBN: 978-1118096895
6th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso