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 (500,000) (500,000) (500,000 ) Costs 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 company if Division C is dropped?

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 (500,000) (500,000) (500,000 ) Costs 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 company if Division C is dropped?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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