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Operations of Borderland Oil Drilling Services are separated into two geographical divisions: United States and Mexico The operating results of each division for 2010 are as follows

Operations of Borderland Oil Drilling Services are separated into two geographical divisions: United States and Mexico. The operating results of each division for 2010 are as follows:  Corporate fixed costs are allocated to the divisions based on relative sales. Assume that all of a division s direct fixed costs could be avoided by eliminating that division. Because the U.S. division is operating at a loss, Borderland s president is considering eliminating it. a. If the U.S. division had been eliminated at the beginning of the year, what would have been Borderland s pre-tax income? b. Recast the income statements into a more meaningful format than the one given. Why would total corporate operating results change from the $108,000 loss to the results determined in part(a)?

Apr 21 2020 View more View Less

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