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Below is a summary income statement for Division A of a large multi division firm. If this division was discontinued, it would not affect
Below is a summary income statement for Division A of a large multi division firm. If this division was discontinued, it would not affect the sales of any other division. The Fixed selling and administrative costs include a $15,000 allocation of the cost of the corporate headquarters building. Division A Actual Sales $200,000 Variable manufacturing costs $30,000 Fixed manufacturing costs. 90,000 Gross Margin $80,000 Variable selling costs 50,000 Fixed selling and administrative costs 40,000 Operating Income (Loss) ($10,000) Required: a) Compute Division A's segment margin. b) What effect would discontinuing Division A have on the firm as a whole? c) What type of costing for segment reporting is the firm using? What type of costing of segment reporting would you recommend and why?
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