The Cook Co. has two divisions, Eastern and Western. The divisions have the following revenue and expenses:

The management of Cook is considering the closure of the Eastern division sales office. If the Eastern division were closed, the fixed costs associated with this division could be avoided but allocated corporate costs would continue.

Given this data:

• Calculate the effect on Cook Co.’s operating profit before and after the closure.

• Should the Eastern division be closed?

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Eastern Western Sales 550,000 500,000 Variable costs 275,000 200,000 Divisional fixed costs 180,000 150,000 Allocated corporate costs 170,000 135,000