TATA Metals Company is thinking of the elimination of its Packaging Department. Management has got the offer from outside firm to supply all Fusion's packaging requirements. To aid her in making decision, Fusion's president has asked controller for analysis of cost of running Fusion's Packaging Department. prepare in that analysis is $9,100 of rent, which represents Packaging Department's allocation of rent on Fusion's factory building. If the Packaging Department is eliminated, space it utilized will be converted to storage space. Presently Fusion rents storage spaces in close by warehouse for $11,000 per year. Warehouse rental would no longer be essential if Packaging Department were eliminated.
1. Describe each of figures given in the exercise with regards to its significance in department closing decision.
2. What kind of cost is $11,000 warehouse rental, from point of view of costs of Packaging Department?