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.

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Definitions:

Imprisonment

The act of confining someone in a prison or as if in a prison as a legal punishment.

Embezzlement

A wrongful conversion of another’s funds or property by one who is lawfully in possession of those funds or that property.

Forgery

A criminal falsification by imitating, impersonating, or altering a real document with the intent to deceive or defraud.

Miranda Rights

The rights that are read to an arrested individual by a law enforcement agent before the individual is questioned about the commission of a crime.