Carlton Corporation is composed of five divisions. Each division is allocated a share of Carlton's overhead to make divisional managers aware of the cost of running the corporate headquarters. The following information relates to the Metro Division:

If the Metro Division is closed, 100% of the traceable fixed operating costs can be eliminated. What will be the impact on Carlton'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 is correct.

Question

Carlton Corporation is composed of five divisions. Each division is allocated a share of Carlton's overhead to make divisional managers aware of the cost of running the corporate headquarters. The following information relates to the Metro Division:

If the Metro Division is closed, 100% of the traceable fixed operating costs can be eliminated. What will be the impact on Carlton'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 is correct.

Quizplus · Accepted Answer

The Answer of Carlton Corporation is composed of five divisions. Each division is allocated a share of Carlton's overhead to make divisional managers aware of the cost of running the corporate headquarters. The following information relates to the Metro Division:

If the Metro Division is closed, 100% of the traceable fixed operating costs can be eliminated. What will be the impact on Carlton'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 is correct.

Carlton Corporation Is Composed of Five Divisions