Sved Target Corporation believed it could increase the company's profits by closing its stores in Canada. Other companies have also tried to Improve their financial performance by downsizing. In November 2017, General Electric announced it would begin a downsizing operation that would result in their exiting businesses that were using over $20 billion in assets in the next one to two years. In January 2018, Newell Brands, the company whose products Include Tupperware, Sharpie pens, Elmer's Glue, and Rowlings sports products, announced it would be reducing its product offerings to the extent that it would close half of its facilities and reduce its revenues by 20 percent. Consider the additional information presented as follows, which is hypothetical. All dollar amounts are in thousands, unit amounts are not. Assume that a manufacturer of breakfast cereals decides to eliminate one of its products called Sugar-Bits from a segment that currently produces three products. As a result, the following are expected to occur 1. The number of units sold for the segment is expected to drop by only 41,200 because of the elimination of Sugar-Bits, since most customers are expected to purchase a Fiber-Treats or Carbo-Crunch product instead. The shift of sales from Sugar-Bits to Fiber- Treats and Carbo-Crunch is expected to be evenly split. In other words, the sales of Fiber-Treats and Carbo-Crunch will each Increase by 112,000 units. 2. Rent is paid for the entire production facility, and the space used by Sugar-Bits cannot be sublet. 3. Utilities costs are expected to be reduced by $25,200. 4. All of the supervisors for Sugar-Bits were terminated. No new supervisors will be hired for Fiber-Treats or Carbo-Crunch. 5. All of the equipment being used to produce Sugar-Bits will be sold at its current market value of $35,600. 6. Facility-level costs will continue to be allocated between the product lines based on the number of units produced. Product Line Earnings Statements (Dollar amounts are in thousands) Annual Costs of Operating Each Product Line Sales in units Sales in dollars Unit-level costs: Cost of production Fiber-Treats Carbo-Crunch 508,800 131,160 $508,800 508,800 $508,800 Sugar-Bits 265,200 $265,200 Total 1,282,800 $1,282,800 50,880 Sales commissions 50,880 29,400 Shipping and handling 6,360 6,360 2,520 15,240 11,448 10,176 Miscellaneous 4,920 26,544 3,816 2,544 2,400 8,760 Total unit-level costs 72,504 69,960 39,240 181,704 Product-level costs: Supervisors salaries 4,920 3,720 2,400 11,040 Facility-level costs: Rent Utilities Depreciation on equipment Allocated companywide expenses Total facility-level costs Total product cost Profit on products 49,200 49,200 24,000 122,400 63,600 63,600 33,150 160,350 204,000 204,000 108,000 516,000 12,720 12,720 6,630 32,070 329,520 329,520 171,780 406,944 403,200 213,420 830,820 1,023,564 $ 101,856 $ 105,600 $51,780 $ 259,236