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Manuel Inc. produces textiles in many different forms. After recording lower than anticipated profits last year, Manuel has decided to shut down one of its
Manuel Inc. produces textiles in many different forms. After recording lower than anticipated profits last year, Manuel has decided to shut down one of its divisions that is not performing well. The accounting manager has compiled the following data on the two divisions being considered for closing: Evaluate the short-term and long-term effects on profits of closing each division. (Loss amounts should be indicated with a minus sign.) Winter Outerwear High-End Suits Net revenues Variable costs $1,000,000 500,000 5,000,000 2,000,000 500,000 Contribution margin Controllable fixed costs 3,000,000 2,000,000 Controllable margin Noncontrollable fixed costs 500,000 750,000 1,000,000 1,500,000 Contribution by SBU $ (250,000) S(500,000) High-End Suits nter Outerwear Short-term effects Long-term effects
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