I need the I need the Contribution to Profit (loss) fir letters B and C please S
ID: 2431628 • Letter: I
Question
I need the I need the Contribution to Profit (loss) fir letters B and C please Stuart 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 2016 follow. Division A Division B Division C S 4,100,000 1,196,000 4,400,000 Sales Less: Cost of goods sold Unit-level manufacturing costs Rent on manufacturing facility Gross margin Less: Operating expenses Unit-level selling and admin. expenses Division-level fixed selling and admin. expenses Headquarters facility-level costs Net income (loss) (2,500,000) (805,000) (2,780,000) (510,000 280,000) (500,000) 1,090,000 11,000 1,120,000 (195,000) (360,000) 180,000 180,000) (65,895)(245,000) (325,000) (180,000) (80,000) S 355,000 (214,895) S 370,000 Required a-1. Based on the preceding information, recommend whether to eliminate Division B a-2. Prepare companywide income statements before and after eliminating Division B b. During 2017, Division B produced and sold 23,000 units of hand tools. Calculate the contribution to profit if sales and production increase to 34,000 units in 2018? c. Suppose that Stuart could sublease Division B's manufacturing facility for $430,000, at a production and sales volume of 34,000 units, Calculate the contribution to profit of Division B Need Contribution to Profit (loss) for letters B and cExplanation / Answer
a- 1. Yes, based on the preceding information, Division B should be eliminated.
a-2. After eliminating Division B:
b. Division B:
Unit Selling Price = $ 1,196,000 / 23,000 units = $ 52
Unit-level Manufacturing Costs = $ 805,000 / 23,000 = $ 35.
Unit -level Selling and Administrative Expenses = $ 65,895 / 23,000 = $ 2.865.
Contribution margin per unit = $ 52 - $ ( 35 + 2,865) = $ 14.135
Contribution margin from 34,000 units in 2018 = 34,000 x $ 14.135 = $ 480,590.
c. Contribution gain from selling 34,000 units = $ 480,590.
Contribution lost ( opportunity cost) = $ (430,000)
Net contribution of Division B to profit = $ 480,590 - $ 430,000 = $ 50,590.
Division A Division B Totals Sales $ 4,100,000 $ 4,400,000 $ 8,500,000 Less: Cost of Goods Sold Unit-level Manufacturing Costs 2,500,000 2,780,000 5,280,000 Rent on Manufacturing Facility 510,000 500,000 1,010,000 Gross Margin $ 1,090,000 $ 1,120,000 $ 2,210,000 Less: Operating Expenses Unit-Level (195,000) (245,000) ( 440,000) Division -Level (360,000) (325,000) (685,000) Head-Quarter Facility Level (270,000) (270,000) (540,000) Net Income ( Loss) $ 265,000 $ 280,000 $ 545,000