(Solution) - Norex Distributors Inc is a small Canadian public corporation located -(2025 Original AI-Free Solution)

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Norex Distributors Inc. is a small Canadian public corporation, located in Saskatchewan, that derives all of its business income from the wholesale distribution of floor coverings. Currently, Norex does not manufacture any of its products and purchases its entire inventory from manufacturers in eastern Canada. Norex has decided to acquire a small manufacturing plant in Saskatchewan. The following assets will be acquired:
Assets Cost
Land ???????????????. $ 80,000
Building ???????????????. 300,000
Manufacturing equipment ???????????? 600,000
Goodwill ???????????????. 50,000
???????????????.????? $1,030,000
The planned acquisition date is July 1, 20X1, the day after the year-end of Norex. The company?s vice-president realizes that the manufacturing business can be purchased and operated through a newly created subsidiary corporation and that the subsidiary?s manufacturing profit of $240,000 (see below) can result in a federal manufacturing and processing deduction of $31,200 at the most. The province of Saskatchewan also offers a 2% rate reduction on manufacturing income.
As an alternative, Norex can purchase the assets and operate the manufacturing business as a division. The vice-president has asked you to determine, from a tax perspective, whether this alternative is preferable to the other. Norex has provided you with estimated results for the first year of operations after the acquisition (i.e., year ended June 30, 20X2).These results are summarized below.
Information relating to new manufacturing plant
1. Manufacturing activities take up 80% of the building?s space. The remaining space is used for storing finished products and for administrative offices.
2. Estimated net income for tax purposes is $240,000, after appropriate deductions for capital cost allowance, eligible capital property, and the following:
Direct labour 
$ 320,000 
Utilities 
14,000 
Property taxes 
4,000 
Raw materials 
610,000 
Administrative and office salaries allocated 
From Norex (see below) 
80,000 
$1,028,000 
Information relating to Norex
(excluding new manufacturing plant)
1. Estimated net income for tax purposes is $4,730,000, including:
Interest income on long-term bonds 
$130, 000 
Administrative salaries 
630,000 
Warehouse and sales salaries 
340,000 
970,000 
Salaries allocated to new plant 
(80,000) 
890,000 
Rent for fleet of delivery trucks 
80,000 
2. In estimating the net income of $4,730,000, an appropriate deduction for CCA was made on the following properties:
Original cost
of assets in class 
UCC
(after CCA) 
Class 1 
$1,340,000 
$ 965,000 
Class 8 
190,000 
75,000 
Class 10 
360,000 
190,000 
$1,890,000 
$1,230,000 
Required:
Should Norex operate the proposed new manufacturing operation as a separate subsidiary corporation or as a division? Provide calculations to support your answer.