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Operating Profits

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A Inc is currently operating at 80 % capacity. Worried about the company's performance, the general manager reviewed the company's operating performance. (All fixed costs are allocated to the segments)

Segment North South East West
Sales 30 40 20 10
Less: variable costs 11 8 21 8
Contribution margin 19 32 (1) 2
Less: fixed costs 9 12 6 3
Operating profit (loss) 10 20 (7) (1)

A. What is the current operating profit for the company as a whole?
B. If the manager eliminated the two unprofitable segments, what would be the new operating profit for the company as a whole?
C. Given the data provided above, how can management maximize profits?

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Solution Summary

The expert examines operating profits with a company having an operating capacity of 80%.

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A) Operating profit for the whole: 10+20-7-1
B) New Operating profit ...

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