Problem:
A major manufacturer decided to put one of its divisions up for sale because managerial information showed the components produced by this division is losing money. A group of employees in the division purchased it. Under the new ownership, the division immediately became profitable.
Requirement:
Question 1: Why do you think the divison was profitable immediately under new ownership?
Question 2: What kind of cost allocation method may have caused the sale of a profitable division, and can you suggest a better methog of cost allocation? Explain why?
Note: Please show basic calculation