King Company has two divisions whose most recent financial statements are shown below:
Required:1) Compute the impact on profit if the Residential Division is eliminated.2) Do you recommend that King eliminate the Residential Division?
What will be an ideal response?
1) If Residential Division is eliminated:
2) Eliminating the Residential Division would reduce company profits from $95,000 ($97,500 - 2,500) to $65,000. Therefore, King should not eliminate the Residential Division.
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