Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Manuel Inc. produces textiles in many different forms. After recording lower than anticipated profits last year, Manuel has decided to shut down one of its divisions that is not performing well. The
Which division should be closed if Manuel is most concerned with increasing long-run profits?
| Winter Outerwear | High-End Suits | ||||||
| Net revenues | $ | 1,200,000 | $ | 5,200,000 | |||
| Variable costs | 660,000 | 2,160,000 | |||||
| Contribution margin | 540,000 | 3,040,000 | |||||
| Controllable fixed costs | 0 | 2,020,000 | |||||
| Controllable margin | 540,000 | 1,020,000 | |||||
| Noncontrollable fixed costs | 770,000 | 1,540,000 | |||||
| Contribution by division | $ | (230,000 | ) | $ | (520,000 | ) | |
multiple choice
-
Winter Outerwear
-
High-End Suits
-
Closing either would have the same impact on long-run profits.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education