The Parts Division of Manufacturing Technology Company has struggled to earn a profit for the past several years. Company management is considering whether to eliminate the division. The division’s most recent income statement is shown below. If management eliminates the division, corporate administrative costs will not change for the company as a whole.

Required

a. Identify the revenues and costs that would be differential for the decision to discontinue the division. \($1,000,000;\) differential costs: $880,000

b. What would you recommend?

Required

a. Identify the revenues and costs that would be differential for the decision to discontinue the division.

b. What would you recommend?

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Manufacturing Technology Company Parts Division Income Statement For the Year Ended December 31 Revenue Expenses: Cost of goods sold $550,000 Selling costs 100,000 Division administrative salaries 150,000 Rent (division facilities) 80,000 Share of corporate administrative costs 150,000 Total expenses Operating loss $1,000,000 1,030,000 $ (30,000)