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Somerset Corporation is composed of five divisions, and each division is allocated a share of Somerset overhead to make divisional managers aware of the cost
Somerset Corporation is composed of five divisions, and each division is allocated a share of Somerset overhead to make divisional managers aware of the cost of running the corporate headquarters. The following information relates to the Metro Division: Sales $7,500,000 Variable operating costs 5,100,000 Traceable fixed operating costs 1,900,000 Allocated corporate overhead 300,000 If the Metro Division is closed, 100% of the traceable fixed operating costs can be eliminated. What will be the impact on Somerset's overall profitability if the Metro Division is closed? A. Decrease by $200,000. B. Decrease by $500,000. C. Decrease by $2,100,000. D. Decrease by $2,400,000. E. None of the above
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