King Company Has Two Divisions Whose Most Recent Financial Statements

question 1

Essay

King Company has two divisions whose most recent financial statements are shown below: $\begin{array}{c}\begin{array}{|l|}\hline\\\hline\\\hline \text {Unit sales}\\\hline \text {Sales}\\\hline \text {Less: cost of goods sold:}\\\hline \text {Unit-level production costs}\\\hline \text {Depreciation, production equipment}\\\hline \text {Gross margin}\\\hline \text {Less: operating expenses:}\\\hline \text {Unit-level selling and admiristrative}\\\hline \text {Corporate-level facility costs (fixed)}\\\hline \text {Net income (loss)}\\\hline\end{array}\begin{array}{l|}\hline \text {Commercial}\\\hline \text {Division}\\\hline \text {5,000}\\\hline \text {\( \$ 400,000 \)}\\\hline \\ \hline \text {175,000 }\\\hline \text {75,000} \\ \hline 150,000\\\hline \\\hline \text {40,000 }\\ \hline \text {\quad 12,500} \\ \hline \quad 97,500 \\ \hline \end{array}\begin{array}{l|} \hline\text { Residential }\\ \hline\text { Division }\\ \hline1,000\\ \hline\$100,000\\ \hline\\ \hline60,000 \\ \hline25,000 \\\hline \$ 15,000\\ \hline\\ \hline10,000 \\\hline 7,500 \\\hline \$(2,500 \\\hline \end{array} \end{array}$

Required:
1)Compute the impact on profit if the Residential Division is eliminated.
2)Do you recommend that King eliminate the Residential Division?

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Definitions:

Television Commercials

Short visual advertisements that are broadcasted on television to promote products, services, or ideas to a wide audience.

Situational Influences

Factors like time and involvement that serve as an interface between consumers and their decision-making process.

Decision-making Process

The steps taken by individuals or groups to choose among alternatives and solve problems.

Time

The indefinite continued progress of existence and events in the past, present, and future regarded as a whole.