The Operations of Grant Ltd ADetermine Operating Income for Grant Ltd

question 27

Essay

The operations of Grant Ltd. are divided into the Fix Division and the Roach Division. Projections for the next year are as follows: $\begin{array}{llll}&\text {Fix}&\text {Roach}\\&\text { Division}&\text { Division }&\text {Total }\\\text { Sales } & £ 60,000 & £ 40,000 & £ 100,000 \\\text { Variable costs } & \underline{20,000} & \underline{15,000} &\underline{35,000}\\\text { Contribution margin } & £ 40,000 & £ 25,000 &{£ 65,000} \\\text { Direct fixed costs } & \underline{12,500} &\underline{30,000}& \underline{42,500} \\ \text { Segment margin } &{£ 27,500}&{£(5,000)} & {£ 22,500}\\\text { Allocated common costs }& \underline{10,000}& \underline{7,500}& \underline{17,500} \\\text { Operating income(loss) } & {£ 17,500} & {£(12,500)} &{£ 5,000}\end{array}$
a.Determine operating income for Grant Ltd. as a whole if the Roach Division is dropped.
b.Should the Roach Division be eliminated?

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Definitions:

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, usually measured as the area above the supply curve and below the market price.

Producer Surplus

The difference between the amount producers are willing to accept for a good or service versus how much they actually receive, showcasing profit.

Market Supply Curve

A graphical representation showing the quantity of a good that producers are willing to sell at different prices, assuming all other factors remain constant.

Diversity Leadership

The practice of leading with attention to diversity, recognizing and valuing differences among team members' backgrounds, perspectives, and skills to enhance creativity and innovation.