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Blue and Green are both divisions in a large, multinational corporation. Each division operates independently. Both divisions make and market the same products, but they
Blue and Green are both divisions in a large, multinational corporation. Each division operates independently. Both divisions make and market the same products, but they operate in different geographic regions. As with many firms in the current time, both divisions face an uncertain operating environoment and have been struggling to find ways to move forward given the new situation. Both firms have been operating well below their actual production capacity. Selected information for 2020 for the two divisions follows: Division Average SP Units produced Units sold Average unit cost (variable costing) Average unit cost (absorption costing) Break even point (in units) DOL Blue $42 86,000 85,000 $31 $36 6,125 12.45 $423,400 Green $45 38,600 35,400 $28 $37 4,320 2.77 $185,300 INI It has come to the attention of upper management (two levels above the managers of Blue and Green) that an opportunity exists to acquire a new product that seems guaranteed to increase profits. They have decided to pilot the new product in one of the two divisions. Which division should be chosen for this project? Explain why. (Note: there is no right or wrong answer here. Be sure to clearly indicate a choice and support it using the data provided.)
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