Hana Company has three separate operating branches: Division X, which manufactures utensils; Division Y, which makes plates;

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Hana Company has three separate operating branches: Division X, which manufactures utensils; Division Y, which makes plates; and Division Z, which makes cooking pots. Each division operates its own facility. The company's administrative offices are located in a separate building. In recent years, Division Z has experienced a net loss and is expected to continue to do so. Income statements for 2018 follow:
Hana Company has three separate operating branches: Division X, which

Required
a. Based on the preceding information, recommend whether to eliminate Division Z. Support your answer by preparing companywide income statements before and after eliminating Division Z.
b. During 2018, Division Z produced and sold 30,000 units of product. Would your recommendation in Requirement a change if sales and production increase to 45,000 units in 2019? Support your answer by comparing differential revenue and avoidable cost for Division Z, assuming that 45,000 units are sold.
c. Suppose that Hana could sublease Division Z's manufacturing facility for $370,000. Would you operate the division at a production and sales volume of 45,000 units, or would you close it? Support your answer with appropriate computations.

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Fundamental Managerial Accounting Concepts

ISBN: 978-1259569197

8th edition

Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Olds

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