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Lenox Manufacturing Co. produces and sells specialized equipment used in the petroleum industry. The company is organized into three separate operating branches: Division A, which
Lenox 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. Required a-1. Based on the preceding information, recommend whether to eliminate Division B. a-2. Prepare company-wide income statements before and after eliminating Division B. b. During year 2, Division B produced and sold 20,000 units of hand tools. Calculate the contribution to profit if sales and production increase to 30,000 units in year 3. c. Suppose that Lenox could sublease Division B's manufacturing facility for $160,000, at a production and sales volume of 30,000 units. Calculate the contribution to profit of Division B. Complete this question by entering your answers in the tabs below. Based on the preceding information, recommend whether to eliminate Division B. (Negative amounts should be indicated by a minus sign.)
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