BX3013:03 PERFORMANCE MANAGEMENT AND CONTROL Mozzarella, Cheddar, and Swiss. All three departments are located within a single large factory on one profit statement Management is considering discontinuing the Swiss cheese line and has provided you site. Sales of Swiss cheese have been declining; further, Swiss cheese showed a loss on last month's BX3013/3/4 Questions Two (15 marks) The -: the following information. 2 The $2,000 per month All 3. 1. Electricity and water bills will be reduced by $100 per month if Swiss cheese is eliminated. Swiss Department supervisor will be transferred to the Cheddar Department. His salary is vats and equipment would be transferred from the Swiss Department equally between Cheddar and Mozzarella. One-third of the insurance and rates in the Swiss Department relate to the vats and equipment; the remaining is related to inventories. 4. Besides the supervisor, there is one employee in each of the five production phases of Swiss cheese. The two employees in curding and milling will be transferred to the Mozzarella Department. Those in matting, salting, and shaping will be terminated. The salaries are as follows: curder, $1,250 per month; miller, $1,025 per month; matter, $1,175 per month; salter, $1,375 per month; shaper, $1,175 per month. 5. The maintenance expense and general and administrative (G & A) expenses are allocated on a nercentage of sales. VITA-RICH DAIRY COMPANY PROFIT STATEMENT For the Month Ended October 31, 2010 Swiss $45,000 24,000 $21.000 Mozzarella $80,000 37,000 $43.000 Cheddar $110,000 54,000 $56.000 Total $235,000 115.000 $120,000 Sales Variable costs Contribution margin Fixed costs: Salaries Electricity & water Advertising of Vita-Rich brand Direct product line advertising Building rent Depreciation of vats and equipment Insurance Rates Maintenance expense G&A expense Total fixed costs Profit (Loss) $ 8,000 850 1,750 2,700 4,800 $ 8,500 1,200 1,750 4,000 7,200 $ 9,200 1,000 1,750 3,000 6,200 $ 25,700 3,050 5,250 9,700 18,200 18,200 2,700 925 4,300 650 250 836 903 25.039 $14.039) 5,900 1,000 325 1,496 1,615 32.986 $10.014 8,000 1,050 350 2,068 2.232 34.850 $21.150 4,400 4.750 92,875 $27.125 Required: Assume that there is no other use for the space now being occupied by the Swiss Cheese Department and that the discontinuance of that department would have no effect on the other cheese products. Would it be beneficial to eliminate the Swiss cheese line? Explain. Support your answer with computations