The Consumer Products Division of Sweet Dreams Has Been Struggling

Essay

The Consumer Products division of Sweet Dreams has been struggling lately. Management has noticed a steady level of losses being reported, and is concerned about how to turn the division around. The division manager reports that the production of Lamps is causing the issue. As part of an in-depth analysis, management wants you to evaluate the following possible solution: Discontinuing the product:
Although a last resort, management is open to the possibility of stopping production of lamps. You are asked to consider all the information from 1-3 as a whole. Additionally, $220,000 of total fixed overhead is allocated to the production of lamps per month.
If the smart financial decision were made with regards to all options considered (Purchase vs Produce, Sell vs Process further, Accept or Decline a special order):
a. What would be your recommendations for each option considered? (Note that some options may affect the information available in other options).
b. Would you recommend that management discontinue producing lamps or not, and what is the overall Gross Profit or Loss that justifies your decision?