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A- XYZ Corporation has two divisions—A and B. The divisions have the following revenues and expenses: A B Sales $ 500,000 $ 5
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Answer #1

1. Situation I - Where Company actively handling two divisions -

B XYZ Corporation A Total Sales $ 500,000 $ 550,000 $1,050,000 Variable Cost $ 200,000 $ 275,000 $475,000 Traceable Fixed Cos

2. Situation II - Where Company plant to shut division B but Common Corporate Cost are unavoidable -

B XYZ Corporation A Total Sales $ 500,000 $ 500,000 Variable Cost $ 200,000 $ 200,000 Traceable Fixed Cost $ 150,000 $ 150,00

Explanation -

Decision of management is not suitable as total cost to the XYZ Corporation making the company more loss by such decision to $155,000 hence management should not shut the operation B. As the decision increase the loss to the company

3. Situation III - Where Company plant to shut division B but 40% Common Corporate Cost are unavoidable -

B XYZ Corporation A Total Sales $ 500,000 $ 500,000 Variable Cost $ 200,000 $ 200,000 Traceable Fixed Cost $ 150,000 $ 150,00

Explanation -

As the Common Corporate cost will be chargable at 40% of $170,000 then company will get the additional cost $68,000 which will be profitable if the company planning to shut the division B with this condition.

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