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Wizkid Bottling Company Plc specialises in the production of alcoholic wine known as Blue Bull and soft drink called “Wiz-Cola”, hence the company operates two divisions i.e. Blue Bull and Wiz-Cola division. Due to high cost of labour and shortage of raw materials for the production of the wine, the Blue Bull division has incurred significant operating losses.
Management decided to close down the Blue Bull division and draw up a plan to discontinue operations of the division.
On February 1, 2019 the Board of Directors of Wizkid Bottling Company Plc approved and immediately announced the formal plan.
The following figures are available for the current and prior year ending March 31.
2019 2018
Blue Bull Wiz-Cola Blue Bull Wiz-Cola
N‟000 N‟000 N‟000 N‟000
Revenue 235,000 1,570,000 250,000 1,250,000
Cost of sales 175,000 505,000 200,000 450,000
Admin. expenses 35,000 311,000 25,000 255,000
Distribution costs 20,000 186,500 10,000 157,500
Other operating expenditure 15,000 124,500 10,000 102,500
Taxation expense /(credit) (3,000) 130,500 1,500 85,000
Additional Information:
The following additional costs are directly related to the decision to discontinue operation, and are yet to be accounted for.
Severance pay of N42.5 million was incurred between February 1, 2019 and March 31, 2019.
A proper evaluation of the recoverability of the assets in the ‘Blue Bull Division’ in terms of IAS 36 led to the recognition of an impairment loss of N9.5 million which is included in other operating expenses above.