Relevant cost-product planning-calculate operating profit

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Reference no: EM1347992

A company is currently operating at 80 percent capacity.

(sales in millions)
Segment
North South East West

Sales $30 $40 $20 $10
Less variable cost ($12) ($8) ($21) ($8)
Contribution margin $18 $32 ($1) $2
Less fixed costs ($9) ($12) ($6) ($3)
Operation profit (loss) $9 $20 ($7) ($1)

A. Find out the current operatng profit for the company as whole?

B. Supposing that all fixed cost are unavoidable, if company eliminated the unprofitable segments, what would be the new operating profit for the company as a whole be?

C. What options does management have to maximize profits?

D. What qualitative factors do you think management should consider before making this decision?

Reference no: EM1347992

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