Question
The operations of Plastics Ltd. are divided into the Blow Moulding Division and the Injection Moulding Division.Projections for the next year are as follows: Blue
The operations of Plastics Ltd. are divided into the Blow Moulding Division and the Injection Moulding Division.Projections for the next year are as follows:
| Blue Moulding Division | Injection Moulding Division | Total |
Sales | $60,000 | $40,000 | $100,000 |
Variable Costs | 20,000 | 15,000 | 35,000 |
Contribution Margin | $40,000 | $25,000 | $65,000 |
Direct Fixed Costs | 12,500 | 30,000 | 42,500 |
Segment Margin | 27,500 | (5,000) | 22,500 |
Allocated Common Costs | 10,000 | 7,500 | 17,500 |
Net Operating Income (Loss) | $17,500 | $(12,500 | $5,000 |
Required:
A.Determine the operating income for Plastics Ltd. as a whole if the Injection Moulding Division is dropped.
B.Should the Injection Moulding Division be eliminated? What is the financial impact of this decision?
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Management And Cost Accounting
Authors: Alnoor Bhimani, Srikant M. Datar, Charles T. Horngren, Madhav V. Rajan
7th Edition
1292232668, 978-1292232669
