Is the following statement correct? “Company profit will always increase if a company drops a losing...
Is the following statement correct? “Company profit will always increase if a company drops a losing profit center.”
Homework Answers
When a profit center is running at a loss, it results in reduction in the overall profits of the company. Therefore, when the company drops on a profit center that is running at a loss, the overall profits of the company are protected to that extent. Hence, the company's profits will always increase, in such a situation.
For example, XYZ company has 3 factories A, B and C. The factory C is running at a loss of USD 3 millions. The combined profits of factories A and B are USD 7 millions. Therefore profits of XYZ is USD 4 millions (that is, USD 7 millions less USD 3 millions). When the company plans on dropping factory C, the profits of the company will be the combined profits of factories A and B, which is USD 7 millions. This is greater than the USD 4 millions profits before dropping off factory C.
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Is the following statement
correct? “Company profit will always increase if a company drops a
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A company shall always drop a profit center that is losing money. A) True B) False
A company shall always drop a profit center that is losing money. A) True B) False
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Question 3 (2 points) When a company considers dropping the losing profit center, what are the...
Question 3 (2 points) When a company considers dropping the losing profit center, what are the issues that should be considered?
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1.) What is total profit expected to be?
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Question 3 (2 points) When a company considers dropping the losing profit center, what are the issues that should be considered?
1.) What is total profit expected to be?
2.) What will be the impact on profit if Kimble drops sofas?
3.) What will be the impact on profit if Kimble drops chairs,
but is able to shift the facilities to making more sofas so that
volume of sofas increases to 7,000 units? (total fixed costs remain
constant).
4.) Variable cost per sofa includes $60 for parts that the
company now buys outside. The company could make the parts at a...
Which of the following is a correct statement about fixed costs? Fixed costs will increase as output increases. If the firm does not produce, fixed costs will be equal to zero Fixed costs are only one-time costs of starting a business. If a firm's fixed cost is $10,000, that will be the same whether it produces 10 units or 100 units Which of the following is a correct statement about variable costs? If the firm does not produce, variable costs...
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