Dropping a division


Problem: The following information relates to next year's projected operating results of the JCB Aluminum Division of WILDA Corporation:

Contribution margin  $1500,000
Fixed expenses         $1700,000

Net operating loss $(200,000)

If JCB Aluminum Division is dropped, $1,000,000 of the above fixed costs would be eliminated. What will be the effect on WILDA's CORP profit next year if jcb Aluminum Division is dropped instead of being kept?

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Accounting Basics: Dropping a division
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