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Jordan Manufacturing Co. produces and sells specialized equipment used in the petroleum industry. The company is organized into three separate operating branches: Division A, which
Jordan 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 2017 follow Division A Division B 4,000,000 $1,150,000 4,500,000 Division C Sales Less: Cost of goods sold Unit-level manufacturing costs Rent on manufacturing facility (2,500,000) 510,000) (2,780,000) (260,000) (500,000) 1,220,000 (800,000) 90,000 (71,125) Gross margin Less: Operating expenses 990,000 Unit-level selling and admin. expenses Division-level fixed selling and admin. expenses Headquarters facility-level costs (192,000) (320,000) (242,000) (319,000) 74,000) 190,000 $ 288,000 (245,125)$469,000 (190,000(190,000 Net income (loss) Required a-1. Based on the preceding information, recommend whether to eliminate Division B a-2. Prepare companywide income statements before and after eliminating Division B b. During 2017, Division B produced and sold 25,000 units of hand tools. Calculate the contribution to profit if sales and production increase to 35,000 units in 2018? c. Suppose that Solomon could sublease Division B's manufacturing facility for $430,000. Assuming that Division B currently has a production and sales volume of 35,000 units, determine whether Solomon should accept the opportunity to sublease the facility or continue production at Division B
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