Answered step by step
Verified Expert Solution
Question
1 Approved Answer
A Manufacturing company has three production lines, and the company's income statement for 2021 showed the following results: Items Sales Man Child Female Total 500,000
A Manufacturing company has three production lines, and the company's income statement for 2021 showed the following results: Items Sales Man Child Female Total 500,000 2,000,000 1,500,000 4000,000 Less: variable cost (350,000) (1200,000) (900,000) (2450,000) Contribution margin 150,000 800,0000 600,000 1550,000 Less: Direct Fixed cost (100,000) (400,000) (250,000) (750,000) Less: Indirect Fixed cost (70,500) (300,000) (220,500) (591,000) Operating Income (20,500) 100,000 129,500 209,000 Because of the continuous losses of the men's division during the past years, the management is considering closing the division in the belief that this will increase the company's total profits. Further, the direct fixed costs of the men's division will be saved if we close this division while only 50% of the indirect fixed cost will be saved if we close this division. The method used by the company to distribute the indirect cost is based on the sales volume. Required: Determine whether the decision to close the men's division is correct or not
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started