Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Manuel Incorporated produces textiles in many different forms. After recording lower-than-anticipated profits last year, Manuel has decided to shut down one of its divisions

image text in transcribed

Manuel Incorporated 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 and has asked you to evaluate the short-term and long-term effects on profits of closing each division. Net revenues Variable costs Contribution margin Controllable fixed costs Controllable margin Noncontrollable fixed costs Contribution by profit center Winter Outerwear High-End Suits $ 1,200,000 660,000 $ 5,200,000 2,160,000 540,000 3,040,000 2,020,000 540,000 1,020,000 770,000 1,540,000 $ (230,000) $ (520,000) Which division should be closed if Manuel is most concerned with increasing long-run profits? Winter Outerwear O High-End Suits Closing either division would have the same impact on long-term profits.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting An Introduction to Concepts Methods and Uses

Authors: Michael W. Maher, Clyde P. Stickney, Roman L. Weil

11th edition

1111571260, 978-1111571269

More Books

Students also viewed these Accounting questions

Question

Define the term finite element?

Answered: 1 week ago