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Author Question: Betty Hopper, controller for Diamond Manufacturing Company, has prepared the following financial ... (Read 92 times)

moore.cailinf

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Betty Hopper, controller for Diamond Manufacturing Company, has prepared the following financial information for the most recent period showing profitability of its three divisions:

ApplianceElectronicsFurniture
Sales$102,000$108,000$120,000
Variable expenses  86,000  92,000114,000
Contribution margin16,00016,0006,000
Fixed expenses:
  Factory insurance1,0001,4002,200
  Depreciation2,0002,6003,600
  Advertising600600600
  Utilities       800    1,000     1,200
Total fixed expenses    4,400    5,600     7,600
Operating income$11,600$10,400($  1,600)

The factory insurance and advertising assigned to the furniture division are avoidable if the division is discontinued. Depreciation will remain unchanged if a division is dropped. Discontinuing furniture will reduce the utilities by $800.

Required:

a.Prepare an analysis showing whether Furniture should be eliminated.
b.If the Furniture division is eliminated, what will be effect on the overall profit for
Diamond?


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Marked as best answer by moore.cailinf on Feb 5, 2023

queenBea90

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moore.cailinf

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Reply 2 on: Feb 5, 2023
Thanks for the timely response, appreciate it


cam1229

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Reply 3 on: Yesterday
Great answer, keep it coming :)

 

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