Sales Less: variable costs Contribution Rent and rates Air Conditioning and Light Insurance Allocated Store Costs Head Office Management Cost Profit Men's 40,000 20,000 20,000 4,000 5,000 5,000 4,500 2,000 (500) Ladies 60,000 36,000 24,000 4,000 6,000 5,000 4,500 2,000 2,500 Children 70,000 15,000 55,000 4,000 7,000 7,000 4,500 2,000 30,500 The Managing Director is considering closing the Men's division as this division does not appear to have been profitable in the last five years. The following information is available: The rent and rates is an allocation across the three divisions. If the Men's division was closed there would be no overall saving on this cost. If the Men's division was closed then 30% of the total Air Conditioning and Light per month would be saved. The insurance company has stated that they would be willing to reduce the Total Insurance bill br 15% of the total existing cost if the Men's division were to close. Store Costs are an allocation of the existing store costs that would not be affected by closing the Men's division Sales Less: variable costs Contribution Rent and rates Air Conditioning and Light Insurance Allocated Store Costs Head Office Management Cost Profit Men's 40,000 20,000 20,000 4,000 5,000 5,000 4,500 2,000 (500) Ladies 60,000 36,000 24,000 4,000 6,000 5,000 4,500 2,000 2,500 Children 70,000 15,000 55,000 4,000 7,000 7,000 4,500 2,000 30,500 The Managing Director is considering closing the Men's division as this division does not appear to have been profitable in the last five years. The following information is available: The rent and rates is an allocation across the three divisions. If the Men's division was closed there would be no overall saving on this cost. If the Men's division was closed then 30% of the total Air Conditioning and Light per month would be sared. The insurance company has stated that they would be willing to reduce the Total Insurance bill br 15% of the total existing cost if the Men's division were to close. Store Costs are an allocation of the existing store costs that would not be affected by closing the Men's division Store Costs are an allocation of the existing store costs that would not be affected by closing the Men's division One member of staff in the head office would be made redundant as a result of this decision. This would save the business 1,500 per month. One-off legal fees of 4,000 would be incurred. One customer that currently buys men's and children's clothes has indicated that they would terminate their entire contract with Noor Fashion if the Men's Division was closed. Sales of children's wear to this customer make a contribution of 3,500 per month Required: (a) Using relevant costing analysis, recommend whether the Men's division should be closed. (b) State and justify how you have treated each item in your analysis above and explain any assumptions you have made (5 marks) WORD COUNT GUIDANCE: 150 WORDS +/-10% (c) Discuss any additional factors that would need to be considered by Noor Fashion in the above