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Green Company sells two items, corn and broccoli. The company is considering dropping corn. It is expected that sales of broccoli will increase by 40%
Green Company sells two items, corn and broccoli. The company is considering dropping corn. It is expected that sales of broccoli will increase by 40% as a result. Dropping corn will allow the company to cancel its monthly rental of its corn shucker machine costing RM100 a month. The other equipment will be used for additional production of broccoli. Green's other allocated costs are unavoidable. The company rents all of its equipment. A condensed, budgeted monthly income statement with both products is below: Sales Food materials Direct labor Equipment rental Other allocated overhead Operating income Total RM20,000 4,500 3,200 2,900 3,100 RM6,300 Corn RM8,000 2,000 1,200 2,600 2,100 RM 100 Broccoli RM12,000 2,500 2,000 300 1,000 RM6.200 Required: Should Green Company close the Corn division? Briefly indicate why or why not
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