Two division’s managers at King Size Manufacturing have been in a long discussio

Question

Two division’s managers at King Size Manufacturing have been in a long discussion with top management about allocation of capital spending over the next three years. The current plan up for approval calls for the bulk of capital expenditures to go to Division H which historically has been the larger division of the firm. The manager defends this decision because, he says, his division has been providing the bulk of the profits for the company.
Division J is smaller and its manager says that it is time to make the divisions more even in size. His bonus is based on total sales and he wants a larger bonus for himself and his management team.

You have been called in to assist management in seeking a solution to this disagreement. What do you recommend?

Explanation / Answer

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