The following information has been extracted from the books of the ABC company which has two operating divisions.
Battery Division
Tyre Division
Sales Revenue
1,664,200
96,200
Cost of Goods sold
978,520
76,470
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Contribution Margin
685,980
19,730
Operating Expenses
527,940
43,600
--------------
-------------
Net Income / (Deficit)
157,740
(23,870)
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Additionally. it has been determined that in the Tyre Division, the cost of Goods Sold is made up of $ 70,000 in variable costs and $ 6,470 in Fixed costs.
Similarly, the Operating Cost is made up of $ 15,000 of Variable Costs and $ 28,600 of Fixed costs.
The company’s accountant has recommended that the Tyre division be closed as it is making a loss.
None of the Fixed costs will be saved if the Tyre Division is closed.
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