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Mirza Co. has three divisions and the information for the year ended December 20...
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Mirza Co. has three divisions and the information for the year ended December 202X is as follows:
| Division M £’000 | Division R £’000 | Division Z £’000 | Total £’000 |
Sales | 350 | 420 | 150 | 920 |
Variable costs | 280 | 210 | 120 | 610 |
Contribution | 70 | 210 | 30 | 310 |
Fixed overheads |
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General# | 40 | 48 | 17 | 105 |
Specific | 52.5 | 52.5 | 52.5 | 157.5 |
Net Profit | -22.5 | 109.5 | -39.5 | 47.5 |
# The general fixed overheads are allocated to each division on the basis of sales revenue.
Using the relevant costing approach, which division(s) should remain in operation if Mirza Co. wishes to maximise profits?
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