What combination of segments will maximize profits

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Reference no: EM131970802

Problem

After reviewing the company's performance, the general manager of Compass Distributing, Inc. must address the firm's profitability. Presently the company has 20% excess capacity. (All fixed costs are allocated costs.)

Segment	North	South	East	West
Sales	10	45	50	20
Less: variable costs	12	32	33	19
Contribution margin	(2)	13	17	1
Less: fixed costs	1	11	13	5
Operating profit (loss)	(3)	2	4	(4)

REQUIRED:

a. For the company as a whole,what is the current operating profit (loss) ?
b. If the manager eliminated the unprofitable segments, what would be the new operating profit (loss) for the company as a whole?
c. What combination of segments will maximize profits? What would be that new operating profit (loss) for the company as a whole?

Reference no: EM131970802

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