The following information has been extracted from the books of the Advent Corporation in respect of its two operating divisions: Aluminum Wire Totals $ $ $ Sales Revenue 1,664,200 96,200 1,760,400 Cost of goods Sold 978,520 76,470 1,054,990 Gross Profit 685,680 19,730 705,410 Operating Expenses 527,940 43,600 571,540 Net Income 157,740 (23,870) 133,870 Additionally, it is determined that in the Wire Division, 10% of the Cost of Goods Sold is Fixed and 65% of the Operating Expenses is Fixed. None of the fixed costs will be saved if the Wire Division is closed. The company hired a Consultant and they have recommended that the Wire Division be discontinued. Required: Should Advent Corporation follow the recommendation of the Consultant?
The following information has been extracted from the books of the Advent Corporation in respect of its two operating divisions: Aluminum Wire Totals $ $ $ Sales Revenue 1,664,200 96,200 1,760,400 Cost of goods Sold 978,520 76,470 1,054,990 Gross Profit 685,680 19,730 705,410 Operating Expenses 527,940 43,600 571,540 Net Income 157,740 (23,870) 133,870 Additionally, it is determined that in the Wire Division, 10% of the Cost of Goods Sold is Fixed and 65% of the Operating Expenses is Fixed. None of the fixed costs will be saved if the Wire Division is closed. The company hired a Consultant and they have recommended that the Wire Division be discontinued. Required: Should Advent Corporation follow the recommendation of the Consultant?
Financial & Managerial Accounting
14th Edition
ISBN:9781337119207
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Carl Warren, James M. Reeve, Jonathan Duchac
Chapter23: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 23.3TIF
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Question 5 Part I
The following information has been extracted from the books of the Advent Corporation in respect of its
two operating divisions:
Aluminum Wire Totals
$ $ $
Sales Revenue 1,664,200 96,200 1,760,400
Cost of goods Sold 978,520 76,470 1,054,990
Gross Profit 685,680 19,730 705,410
Operating Expenses 527,940 43,600 571,540
Net Income 157,740 (23,870) 133,870
Additionally, it is determined that in the Wire Division, 10% of the Cost of Goods Sold is Fixed and 65%
of the Operating Expenses is Fixed.
None of the fixed costs will be saved if the Wire Division is closed.
The company hired a Consultant and they have recommended that the Wire Division be discontinued.
Required: Should Advent Corporation follow the recommendation of the Consultant?
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