2. Upper management is evaluating the six divisions of McCoy enterprises. The managers are considering discontinuing its Brick Division because it is currently operating at a loss. None of the fixed costs will reduce or go away if the Brick division is discontinued. Below are cost and profit information. Should McCoy discontinue the Brick Division and why? Sales Other Five Divisions Brick Division Total Sales $1,664,200 $96,200 $1,760,400 Variable Costs $1,178,520 $85,000 $1,263,520 Contribution Margin $485,680 $11,200 $496,880 Fixed Costs $327,940 $35,070 $363,010 Operating Income $157,740 ($23,870) $133,870 a. Yes, because discontinuing Bricks would be a financial advantage of $85,000 b. Yes, because discontinuing Bricks would be a financial advantage of $23,870 c. No, because discontinuing Bricks would be a financial disadvantage of ($11,200) d. No, because discontinuing Bricks would be a financial disadvantage of ($96,200)

4. Davidson Power Tools has two divisions. Hand Tools and Shop Tools. Below is information from Davidsons prior year financials. Hand Tools Shop Tools Total Sales Revenue 157,000 101,000 258,000 Variable Expenses 86,000 90,000 176,000 Contribution Margin 71,000 11,000 82,000 Fixed Expenses 47,000 26,000 73,000 Financial Advantage (Disadvantage) 24,000 (15,000) 9,000 If $15,000 of fixed costs related to the shop tool safety manager job will be eliminated by discontinuing the shop tools division, should Davidson Power Tools discontinue or keep the Shop Tools division and why? a. No, b/c discontinuing will result in a financial disadvantage of ($15,000) b. No, b/c discontinuing will result in a financial disadvantage of ($11,000) c. Yes b/c discontinuing will result in a financial advantage of $4,000 d. Yes b/c discontinuing will result in a financial advantage of $15,000