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Q2 PVO Manufacturing Bhd has three operating division. During the first quarter of 2011, the company reported total profit from operations of RM96,000 and the

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Q2 PVO Manufacturing Bhd has three operating division. During the first quarter of 2011, the company reported total profit from operations of RM96,000 and the following results for the divisions: Division A (RM) B (RM) C (RM) Sales 570,000 830,000 980,000 Cost of goods sold 480,000 530,000 606,000 Selling and administrative expenses 140,000 252,000 276,000 Profit / (loss) from operations (50,000) 48,000 98,000 Analysis of the costs reveals the following percentages of variable costs in each division. Division A B C 90% 80% 85% Cost of goods sold Selling and administrative expenses 80% 60% 70% Discontinuance of any division would eliminate 60% of the fixed costs for that division. Top management is deeply concerned about the unprofitable division. The consensus is that to close down the unprofitable division. Required: a) Prepare a profit statement to show the effect of closing down unprofitable division. b) Based on your calculation in (a) above, advice the top management whether to close down unprofitable division

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