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Accounting

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

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91166820

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