Simon Forest Corporation operates two divisions, the Timber Divi

Simon Forest Corporation operates two divisions, the Timber Division and the Consumer Division. The Timber Division manufactures and sells logs to paper manufacturers. The Consumer Division operates retail lumber mills which sell a variety of products in the do-it-yourself homeowner market. The company is considering disposing of the Consumer Division since ithas been consistently unprofitable for a number of years. The income statements for the two divisions for the year ended December 31, 2010 are presented below:

Simon Forest Corporation operates two divisions, the Timber Divi

In the Consumer Division, 60% of the cost of goods sold is variable costs and 25% of selling and administrative expenses are variable costs. The management of the company feels it can save $60,000 of fixed cost of goods sold and $50,000 of fixed selling expenses if it discontinues operation of the Consumer Division.

(a) Determine whether the company should discontinue operating the Consumer Division. Prepare a schedule which supports your decision.
(b) If the company had discontinued the division for 2010, determine what net income would havebeen.

A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...


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