Required:

1. (i)prepare a statement, in a format suitable for making a decision on whether to discontinue product D, which clearly shows the results of products A, B, C and D in February. Would you recommend discontinuing product D? Explain your recommendation.
2. (ii)The production manager has presented during a management meeting in March that if product D was discontinued, the resources freed up could be used to increase the production of product C by 40%. In addition, if the production quantity of any product increases by more than 25%, then its specific fixed production costs will increase by 30%. Based on this new information, prepare a statement clearly showing the results for February if product D was discontinued. Based on your revised statement, recommend if Zell should discontinue product D.
3. (iii)Explain relevant non-financial factors which Zell should consider before deciding to discontinue product D.

Zell Inc. manufactures and sells four product lines. The prot and loss statement for February is as follows: A E E Q T0_ta| S $ $ $ 5 Sales 30,000 20,000 35,000 15,000 100,000 Cost of Sales 15,000 3,000 22,000 10,000 55,000 Gross Prot 14,000 12,000 13,000 5,000 44,000 Selling 3,000 7,000 3,500 5,500 30,000 Administration 2,000 2,000 2,000 2,000 3,000 Net Prot 4,000 3,000 2,500 (3,500) 5,000 The management team is concerned about the results presented for February, particularly results pertaining to product D. It has been suggested that Zell would be better off ceasing production of product D. You are the accountant at Zell and have analysed the production cost structures of each product line more carefully: A a g Q Total 5 S S S 5 Variable Costs 4,300 1,500 13,200 5,000 24,500 Fixed Costs 11,200 5,400 3,300 5,000 31,400 Cost of Sales 15,000 3,000 22,000 10,000 55,000 The total xed production costs gure includes $20,000 which is not specically attributable to any one product. The $20,000 has been apportioned to each product based on sales revenue. The selling overhead comprises of a fixed portion of $5,000 per product line, plus a variable portion which varies according to sales revenue. The xed selling cost is not specific to any one product line but the sales director believes it should be equally shared by the four products. The administration cost is a central overhead and not affected by the products manufactured