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Benson Manufacturing Co. produces and sells specialized equipment used in the petroleum industry. The company is organized into three separate operating branches: Division A, which
Benson Manufacturing Co. produces and sells specialized equipment used in the petroleum industry. The company is organized into three separate operating branches: Division A, which manufactures and sells heavy equipment; Division B, which manufactures and sells hand tools; and Division C, which makes and sells electric motors. Each division is housed in a separate manufacturing facility. Company headquarters is located in a separate building. In recent years, Division B has been operating at a net loss and is expected to continue to do so. Income statements for the three divisions for year 2 follow. Division A $ 3,500,000 Division B $1,104,000 Division C $ 4,100,000 (2,100,000) (510,000) 890,000 (782,000) (255,000) 67,000 (2,580,000) (400,000) 1,120,000 Sales Less: Cost of goods sold Unit-level manufacturing costs Rent on manufacturing facility Gross margin Less: Operating expenses Unit-level selling and administrative expenses Division-level fixed selling and administrative expenses Headquarters facility-level costs Net income (loss) (189,000) (50,025) (239,000) (280,000) (180,000) 241,000 (68,000) (180,000) $ (231,025) (313,000) (180,000) 388,000 $ $ Required c. Suppose that Benson could sublease Division B's manufacturing facility for $460,000, at a production and sales volume of 33,000 units. Calculate the contribution to profit of Division B. Complete this question by entering your answers in the tabs below. Required A1 Required A2 Required B Required C Suppose that Benson could sublease Division B's manufacturing facility for $460,000, at a production and sales volume of 33,000 units. Calculate the contribution to profit of Division B. (Negative amounts should be indicated by a minus sign.) $ 392,775 Contribution to profit (loss) Should Division B be eliminated? Yes
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