For your Unit 7 Complete assignment, write a narrative essay (minimum 1500 words) in which you address and discuss the questions and statements listed below. Use at least four scholarly sources and remember to demonstrate a thorough understanding of the READ and ATTEND sections in your essay. Cite your sources in APA format.
Edmonds, T. (2020). Fundamental Managerial Accounting Concepts (9th ed.). McGraw Hill.
How do managers go about making segment product line elimination decisions? In a narrative format, answer all questions presented in the case, ATC 6-1 on pages 300-301. Mention some ways other than cost-cutting that will improve company operations. Be sure to use at least four sources and use APA format.
Identify some costs savings these companies might realize by reducing the number of items they sell or use in production. Be as specific as possible, and use your imagination.
Consider the additional information presented as follows, which is hypothetical. All dollar amounts are in thousands, unit amounts are not. Assume that P&G decides to eliminate one shampoo product-line, Luster, for one of its segments that currently produces three products. As a result, the f
ollowing are expected to occur:
The number of units sold for the segment is expected to drop by only 125,000 because of the elimination of Luster, since most customers are expected to purchase a Anagen or Catagen product instead. The shift of sales from Luster to Anagen and Catagen is expected to be evenly split. In other words, the sales of Anagen and Catagen will each increase by 50,000 units.
Rent is paid for the entire production facility, and the space used by Luster cannot be sublet.
Utilities costs are expected to be reduced by $40,000.
All of the supervisors for Luster were all terminated. No new supervisors will be hired for Anagen or Catagen.
Half of the equipment being used to produce Luster is also used to produce the other two products and its depreciation cost must be absorbed by them. The remaining equipment has a remaining a book-value of $340,000 and can be sold for only $60,000.
Facility-level costs will continue to be allocated between the product lines based on the number of units produced.
Prepare revised product-line earnings statements based on the elimination of Luster. (Hint: It will be necessary to calculate some per-unit data to accomplish this.)