Question

A business segment reports segment revenues of $1.2 million, segment costs of $1.0 million, and allocated corporate overhead costs of $300,000 If management were to drop the segment, overall corporate profits would:_______. a. increase by $100.000. b. decrease by $100,000 c. increase by $200,000. d. decrease by $200.000.

Answer 1

Answer:

d. decrease by $200.000.

Explanation:

The computation of the segment profit is shown below:

Segment profit = Segment revenues - Segment cost

                         = $1.2 million - $1.0 million

                         = $0.2 million or $200,000

Since the management want to drop the segment which results to decrease in the overall corporate profits that means the segment profit will also got decreased by  $200,000

The overhead cost is not relevant. Hence, ignored it