Brown Mack Ltd Currently Has Two Large Manufacturing Divisions That

question 52

Multiple Choice

Brown Mack Ltd currently has two large manufacturing divisions that share a single plant. Brown Mack owns the plant but has calculated that $6 million of overhead expenses should be allocated to the two equal-sized divisions. If Brown Mack starts a third manufacturing division, of equal size to the other two divisions, then what overhead cost should the new division take into account on its capital budgeting cash flow analysis?

• A) $0
• B) $2 million
• C) $3 million
• D) $6 million

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