Balding, Ltd. is composed of 5 divisions. Each division is allocated a share of the overhead of Balding to make divisional managers aware of the cost of running the corporate headquarters. The following information relates to the Metro Division: Sales $6,100,000 Variable Operating Costs $3,640,000 Traceable Fixed Operating Costs $1,560,000 Allocated Corporate Overhead $200,000If the Metro Division is closed, 100% of the traceable fixed operating costs can be eliminated. What will be the impact on the overall profitability of Balding if the Metro Division is closed? Select one: A. Decrease by $900,000 B. Decrease by $5,900,000 C. Decrease by $4,340,000 D. Decrease by $2,460,000 E. Decrease by $700,000

Balding, Ltd. is composed of 5 divisions. Each division is allocated a share of the overhead of Balding to make divisional managers aware of the cost of running the corporate headquarters. The following information relates to the Metro Division: Sales $6,100,000 Variable Operating Costs $3,640,000 Traceable Fixed Operating Costs $1,560,000 Allocated Corporate Overhead $200,000If the Metro Division is closed, 100% of the traceable fixed operating costs can be eliminated. What will be the impact on the overall profitability of Balding if the Metro Division is closed? Select one: A. Decrease by $900,000 B. Decrease by $5,900,000 C. Decrease by $4,340,000 D. Decrease by $2,460,000 E. Decrease by $700,000

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter10: Cost Analysis For Management Decision Making

Section: Chapter Questions

Problem 7E: Columbia Products Inc. has two divisions, Salem and Seaside. For the month ended March 31, Salem had...

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Question

Sales	$6,100,000
Variable Operating Costs	$3,640,000
Traceable Fixed Operating Costs	$1,560,000
Allocated Corporate Overhead	$200,000

If the Metro Division is closed, 100% of the traceable fixed operating costs can be eliminated. What will be the impact on the overall profitability of Balding if the Metro Division is closed?

Select one:

Decrease by $900,000

Decrease by $5,900,000

Decrease by $4,340,000

Decrease by $2,460,000

Decrease by $700,000

Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.

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