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East West Sales $7 20, 000 $350.000 Variable costs .000 240.000 Traceable fixed costs .000 DOO' OB Allocated common Corporate COSTS .` 120.000 50.000...

The Mulroney Corporation has two divisions—East and West. The divisions have the following revenues and expenses:

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7.    Management at Mulroney is considering the elimination of the West Division. If the West Division were eliminated, its traceable fixed costs could be avoided. Total common corporate costs would be unaffected by this decision. Given these data, should the West Division be eliminated? Why or why not? Show your computations to support your decision. 

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East
West
Sales
$7 20, 000
$350.000
Variable costs ...
370.000
240.000
Traceable fixed costs ..
130.000
DOO' OB
Allocated common Corporate COSTS . . . . . . .`
120.000
50.000
Net operating income ( 1055 )*
$109.000
$120.000

Top Answer

West Division should not be eliminated; this is because the net the overall net operating income would reduce to $50 , 000... View the full answer

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