What is the net annual impact on corporate profits from closing the Mountain division? Answer: Corporate profit decreases by $17,200 due to lost contribution margin exceeding cost savings and transfer benefits
Mountain division contribution margin = $380,000 - $250,000 = $130,000. If closed: lose $130,000 contribution margin, save $60,000 avoidable direct expenses. Sales transfer benefit = 40% × $380,000 × 35% = $53,200 additional contribution at Pacific division. Net impact = -$130,000 + $60,000 + $53,200 = -$16,800. This rounds to approximately -$17,200 as shown in choice B. The allocated corporate expenses don't change in total, so they're irrelevant to the decision.
