Summers Corporation Is Composed of Five Divisions If the Metro Division Is Closed, 100% of the Traceable

question 71

Multiple Choice

Summers Corporation is composed of five divisions. Each division is allocated a share of Summers's overhead to make divisional managers aware of the cost of running the corporate headquarters. The following information relates to the Metro Division: $\begin{array}{lr}\text { Sales } & \$ 7,500,000 \\\text { Variable operating costs } & 5,100,000 \\\text { Traceable fixed operating costs } & 1,900,000 \\\text { Allocated corporate overhead } & 300,000\end{array}$ If the Metro Division is closed, 100% of the traceable fixed operating costs can be eliminated. What will be the impact on Summers's overall profitability if the Metro Division is closed?

• A) Decrease by $200,000.
• B) Decrease by $500,000.
• C) Decrease by $2,100,000.
• D) Decrease by $2,400,000.
• E) None of the answers are correct.

---

Definitions:

Rightfully Revokes Acceptance

Pertains to a scenario where a purchaser legally cancels their acceptance of goods if the goods fail to conform to the contract in a substantial way.

Tender

Tender refers to the offer of payment by one party to another, or the offer to perform a contract obligation, in a manner that meets the terms of the contract.

Conforming Goods

Products that meet the specifications and terms outlined in a contract of sale, matching the buyer's expectations.

Buyer's Disposition

The buyer's intention or decision regarding the management, use, or sale of purchased assets.