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.$

$12.$ American Corporation has $$200,000$ of joint processing costs and is studying

whether to process J and K beyond the split$-$off point. Information about J and K

follows.

Product J Product K

Tons produced $25,00015,000$

Separable variable processing costs beyond split$-$off $$64,000$ $$100,000$

Selling price per ton at split$-$off $1552$

Selling price per ton after additional processing $2158$

If American desires to maximize total company income, what should the firm do

with regard to Products J and K$?$

Product J Product K

A$.$ Sell at split$-$off Sell at split$-$off

B$.$ Sell at split$-$off Process beyond split$-$off

C$.$ Process beyond split$-$off Sell at split$-$off

D$.$ Process beyond split$-$off Process beyond split$-$off