ABC Inc. producing A, B and C products, the following are costs and revenues information regarding...

ABC Inc. producing A, B and C products, the following are costs and revenues information regarding these products during 2010:

Data	A	B	C	Total
Revenues	200,000	300,000	150,000	650,000
Costs:
DM	80,000	160,000	60,000	300,000
DL	30,000	60,000	20,000	110,000
VOH	15,000	25,000	10,000	50,000
FOH (department- specific)	20,000	35,000	15,000	70,000
FOH (factory-general)	10,000	10,000	10,000	30,000
Operating expenses (Fixed)	20,000	20,000	20,000	60,000
Operating income	25,000	(10,000)	15,000	30,000

Required:

1. Based on the above information, do advice the company to close department (B) assuming that in case of closing the department all department specific cost will be eliminated.

2. If the company closed department (B) and expand its operations in department (C), which entails increasing the revenues and costs by 40% and 80% of the fixed OH department specific cost moved to department (C), would you advise the company to do so?

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Expert Solution

ekkarill92 answered 1 year ago

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