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For the past five years, the McArthur Company has produced and sold frequency meters to genetics labs throughout the United States. Recently, a strong competitor
For the past five years, the McArthur Company has produced and sold frequency meters to genetics labs throughout the United States. Recently, a strong competitor has entered the market and McArthur is considering whether it should continue to produce and sell the frequency meters. The following information has been gathered to assist management in its decision: A) Sales volume (units) is estimated to drop by 25% once the competitor becomes fully operational. B) The equipment used to produce the meters was purchased five-years ago for $1,500,000. C) The space now used to produce the meters would be reallocated to eliminate the need to rent warehouse space. D) The share of the CEO's salary allocated to the frequency meters would be reassigned to the oscillator division Which of the items listed above is (are) relevant to the decision to continue the production and sale of the frequency meters? The King Company has two divisions--North and South. The divisions have the following revenues and expenses Sales Variable expenses Traceable fixed expenses Allocated common corporate expenses Net operating income (loss) North $960,000 462,000 272,000 264,000 $(38,000) South $920,000 360,000 222,000 202,000 $136,000 Management at King is pondering the elimination of North Division. If North Division were eliminated, its traceable fixed expenses could be avoided. The total common corporate expenses would be unaffected. Given these data, the elimination of North Division would result in an overall company net operating income of
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