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LEARNING CASE: JAZMAN SDN BHD JAZMAN SDN BHD has three divisions: Bery, Wise, and TH. The results of May, 2016 are presented below. Bery Wise
LEARNING CASE: JAZMAN SDN BHD JAZMAN SDN BHD has three divisions: Bery, Wise, and TH. The results of May, 2016 are presented below. Bery Wise TH . Total Units sold 3,000 5,000 2,000 10,000 Revenue $70,000 $50,000 $40,000 $160,000 Less variable costs 32,000 26,000 16,000 74,000 Less direct fixed costs 14,000 19,000 12,000 45,000 Less allocated fixed costs 6,000 10,000 4,000 20,000 Net income $18,000 $5,000 $ 8.000 $ 21,000 All of the allocated costs will continue even if a division is discontinued. JAZMAN allocates indirect fixed costs based on the number of units to be sold. Since the Wise division has a net loss, JAZMAN feels that it should be discontinued. JAZMAN feels if the division is closed, that sales at the Bery division will increase by 12%, and that sales at the TH division will stay the same Required (a) Prepare an analysis showing the effect of discontinuing the Wise division. (b) Should JAZMAN close the Wise division? Briefly indicate why or why not
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