Nabob Corporation Is Considering Expanding into the Midwest

question 9

Essay

Nabob Corporation is considering expanding into the Midwest. It is estimated that this new division would generate an average of $378,000 in sales per year. The variable manufacturing costs would be $187,000, variable selling costs would be $72,000, and controllable fixed costs would be $90,000. In addition, the company planned to allocate $85,000 of company common fixed costs to the new division. Is this a wise decision for Nabob Corporation? Why?

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Definitions:

Net Financial Assets

The difference between a person's or entity's total financial assets and total financial liabilities.

Security

Financial instruments or assets held to back debts or investments, or as a means to ensure the fulfillment of financial obligations.

Insurance Contract

A legally binding agreement between an insurer and the insured, detailing the terms for the payment of claims under certain conditions.

Securities Act

A law or legislation that regulates the issuance and sale of securities to protect investors against misrepresentation, deceit, and other frauds.