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The O Company has 3 separate branches:
	X manufactures utensils,
	Each branch (division) operates its own facility.
	The administative offices are located in a separate building and the Administrative-Facility Level Costs are allocated among X, Y and Z.
	The branch income statements are presented for the year 20X8; Branch (Division) Z has experienced a Net Loss.
	Branch Z has suffered losses in recent years and the company expects Z to continue to operate at a loss.
Here are the data:
(Note: no formulas have been used to present the data.)
											Division X		Division Y			Division Z
Sales											2,000,000		1,600,000			1,710,000
Less: Cost of Goods Sold
		Unit-level Manufacturing Costs									(1,100,000)		(580,000)			(900,000)
		Rent on Manufacturing Facility									(240,000)		(220,000)			(450,000)
Gross Margin											660,000		800,000			360,000
Less: Operating Expenses
		Unit-Level Selling and Admin. Expenses									(60,000)		(45,000)			(150,000)
		Division-Level Fixed Selling and Admin. Expenses									(140,000)		(125,000)			(240,000)
		Administrative Facility-Level Costs									(80,000)		(80,000)			(80,000)
Net Income (loss)											380,000		550,000			(110,000)

a. Based on the information above, recommend whether Division Z should be eliminated.

Support your answer by preparing companywide income statements one with Division Z and one without Division Z.

Use the Excel spreadsheet we have included in the folder with the instructions.

b. During 20X8, Division Z produced and sold 30,000 units of product. Would your recommendation in

part a change if sales and production increase to 45,000 units in 2009? Support your answer

by comparing differential revenue and avoidable cost for Division Z, assuming that 45,000 units are sold.

Use the same Excel spreadsheet as you used in part a (above) .

c. Suppose that the company could sublease Division Z's manufacturing facility for $910,000. Would you

operate the division at a production and sales volume of 45,000 units or would you sublease? Support your answer with appropriate computations using Excel!

(Again, use the same Excel spreadsheet as used in parts a & b above.)

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