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ZanzabumX [31]
3 years ago
5

Pacific Division has the following information:

Business
1 answer:
Luden [163]3 years ago
5 0

Answer:

it will be a net loss of 560,000

It is better to produce at a loss of 60,000 than a loss of 620,000

That's because, the Division cover a good portion of their allocate fixed cost.

Explanation:

The fixed expense are allocate cost. Are unavoidable cost It will remain even if the division is dropped.

The sales and variable cost will be zero.

\left[\begin{array}{cccc}&Continued&Discontinued&Differential\\Sales&1,200,000&0&-1,200,000\\Variable&-640,000&0&640,000\\Allocate cost&-620,000&-620,000&0\\Result&-60,000&-620,000&-560,000\\\end{array}\right]

After posting the values, we calculate the differential income.

In this case it will be a loss for 560,000

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