3) Below is an absorption income statement for a division of a conglomerate: Sales $5,000,000 *COGS $3,800,000 Gross Profit $1,200,000 **SGA $1,500,000 NOI $ -300,000 ========= *Included in COGS are $220,000 of fixed COGS items including depreciation. **Included in SGA are $140,000 of fixed SGA expenses. The fixed costs will be allocated to other divisions if division is closed. Given the numerical presentation above should the firm close the division? Prepare a variable costing income statement to confirm your decision. Please explain why your decision is correct.
3) Below is an absorption income statement for a division of a conglomerate:
Sales $5,000,000
*COGS $3,800,000
Gross Profit $1,200,000
**SGA $1,500,000
NOI $ -300,000
=========
*Included in COGS are $220,000 of fixed COGS items including
**Included in SGA are $140,000 of fixed SGA expenses.
The fixed costs will be allocated to other divisions if division is closed.
Given the numerical presentation above should the firm close the division?
Prepare a variable costing income statement to confirm your decision.
Please explain why your decision is correct.
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