Furst, Inc. believed it could increase the companys profits by eliminating some product-lines. Other companies have also tried to improve their financial performance by downsizing. In November 2017, General Electric announced it would begin a downsizing operation that would result in their exiting businesses using over $20 billion in assets in the next one to two years. In January 2018, Newell Brands, the company whose products include Tupperware, Sharpie pens, Elmers Glue, and Rawlings sports products, announced it would be reducing its product offerings to the extent that it would close half of its facilities and reduce its revenues by 20 percent. Consider the additional information presented as follows, which is hypothetical. All dollar amounts are in thousands, unit amounts are not. Assume that Furst decides to eliminate one shampoo product-line, Luster, for one of its segments that currently produces three products. As a result, the following are expected to occur:

1. (1) The number of units sold for the segment is expected to drop by only 160,000 because of the elimination of Luster, since most customers are expected to purchase a Anagen or Catagen product instead. The shift of sales from Luster to Anagen and Catagen is expected to be evenly split. In other words, the sales of Anagen and Catagen will each increase by 35,000 units.

   (2) Rent is paid for the entire production facility, and the space used by Luster cannot be sublet.

   (3) Utilities costs are expected to be reduced by $43,000.

   (4) All of the supervisors for Luster were all terminated. No new supervisors will be hired for Anagen or Catagen.

   (5) Half of the equipment being used to produce Luster is also used to produce the other two products and its depreciation cost must be absorbed by them. The remaining equipment has a remaining a book-value of $375,000 and can be sold for only $95,000.

   (6) Facility-level costs will continue to be allocated between the product lines based on the number of units produced.ch 6 VA Q13

Catagen 460,000 $920,000 Luster 230,000 $460,000 Total 1,150,000 $2,300,000 Product-Line Earnings Statements (Dollar amounts are in thousands) Annual Costs of Operating Each Product Line Anagen Sales in units 460,000 Sales in dollars $920,000 Unit-level costs: Cost of production 87,400 Sales commissions 11,960 Shipping and handling 20,700 Miscellaneous 6,900 Total unit-level costs 126,960 Product-level costs: Supervisors' salaries 9,200 Facility-level costs: Rent 101,000 Utilities 115,000 Depreciation on equipment 410,000 Allocated company-wide expenses 23,000 Total facility-level costs 649,000 Total product cost 785,160 Profit on products $134, 840 87,400 11,960 18,400 4,600 122,360 47,100 5,900 9,200 2,600 64,800 221,900 29,820 48,300 14,100 314,120 7,200 2,300 18,700 101,000 115,000 410,000 23,000 649,000 778,560 $141, 440 50,000 57,500 202,000 11,500 321,000 388, 100 $ 71,900 252,000 287,500 1,022,000 57,500 1,619,000 1,951,820 $ 348,180 Dequired Revised Product-line Earnings Statements Annual Costs of Operating Each Product Line Anagen Sales in units Catagen Totals Sales in dollars Unit-level costs: Total unit-level costs Product-level costs: Facility-level costs: Total facility-level costs Total unit-level costs Product-level costs: Facility-level costs: Total facility-level costs Total product cost Profit on products Sale of Luster equipment Segment earnings