A.The operations of Bunga Raya Sdn Bhd (BRSB) are divided into the Fix Division and the Split Division. The extracted income statement for the last financial year is as follows:

Items

Fix Division (RM)

Split Division (RM)

Total

(RM)

Sales revenue

80,000

47,000

127,000

Variable expense

30,000

29,000

59,000

Fixed cost:

Allocated common costs

7,000

6,500

13,500

Line supervisor

12,000

11,000

23,000

Maintenance of equipment

2,000

1,500

3,500

Depreciation of equipment

7,500

7,000

14,500

Office rental

2,000

3,000

5,000

Profit (Loss)

19,500

(11,000)

8,500

This is the third year in a row that Split Division is making a loss. Therefore, the management is considering of discontinuing this division. If the division is closed, the equipment and office used for Split Division will not be utilised for other purpose.

REQUIRED:

(a)Evaluate whether it is worthwhile for BRSB to drop Split Division.

(b)Discuss THREE (3)examples of qualitative factors that any organization should consider before dropping any of their division.