McGrew_MBA733 Week 6 Problems - Trish McGrew MBA733 Week 6...

Trish McGrew MBA733 Week 6 problems
(000's) Total Northgate Edgewood Weston Southboro
Sales $3,800.00 $1,520.00 $570.00 $1,140.00 $570.00
Costs $3,650.00 $1,225.00 $380.00 $1,685.00 $360.00
remove allocated $(975.00) $(390.00) $(146.25) $(292.50) $(146.25)
segment margin $1,125.00 $685.00 $336.25 $(252.50) $356.25
Management Control Process
In a belt-tightening measure, the Sandalwood company is taking a close look at its four
divisions with an eye toward closing any unprofitable ones. Costs incurred at the corporate
headquarters level have been distributed to each division in proportion to sales revenue. All
costs incurred by each division except the allocated corporate headquarters costs are
considered to be avoidable if a division is shut down. The corporate headquarters costs
amount to $975,000.
Divisions ($000s)
Total Northgate Edgewood Weston Southboro
Sales $3800 $1520 $570 $1140 $570
Costs $3650 $1225 $380 $1685 $360
Profits (losses) $150 $295 $190 $ (545) $210
Required :
a. Based on the above information, what recommendation would you make concerning
possible division closings? Show all calculations.
b. Since the above data represents semiannual information, what other variables should be
included in the decision to close down a division?

a.