3-33 Drop a division relevant cost The company accountant at Spike Transport Company reported (LO2, 3) the following information for the most recent operating period: Sales... Bus DIVISION $17,000,000 $2,600,000 TAXI DIVISION TRANSPORT DIVISION TOTAL $11,000,000 $30,600,000 Variable costs Fuel. $ 9,350,000 $1,040,000 3,740,000 408,000 Labor... Other supplies. Contribution margin Fixed costs Avoidable fixed costs Allocated company fixed overhead. Profit.. $ 324,330 $ 227,014 $ (428,544) $ 122,800 546,000 57,200 $ 3,502,000 $ 956,800 $ 2,970,000 $ 5,610,000 $16,000,000 2,200,000 220,000 $ 7,428,800 6,486,000 685,200 $ 1,500,000 $ 456,000 1,677,670 273,786 $ 2,350,000 1,048,544 $ 4,306,000 3,000,000 Required (a) The company owner, Spike Potruff is tired of the continuing losses being reported for the Transport Division. What is the effect on Spike Transport Company's operating income if the Transport Division is dropped? (b) Ellen Potruff, the operating manager, believes that if the Transport Division is shut down, customers will ship some of the items formerly carried by the Transport Division to the Bus Division and the Taxi Division. Sales in the Bus Division will increase by 15%, and sales in