Walter Manufacturing Co. produces and sells specialized equipment used in the petroleum industry. The company is organized into three separate branches : Division A, which is heavy equipment, Division B, which is hand tools and Division C which makes and sells electric motors. Each division has its ownfacility and head quarters is located in a separate building. In recent years, Division B has been operating at a loss and is expected to keep doing so.
A. Based on the preceding info recommend whether to eliminate Division B. Support your answer with income statements before and after eliminating Division B
B. During 2009, Division B produced and sold 20,000 units of hand tools. Would your recommendation change if sales and production increase to 30,000 units in 2010? Support your answer by comparing differential revenue and avoidable costs for Division B assuming it sells 30,000 units.