4 2 points Betty's Fashions operates retail stores in both downtown and suburban locations. The company has two responsibility centers: the City Division, which contains stores in downtown locations, and the Mall Division, which contains stores in suburban locations. Betty's CEO is concerned about the profitability of the City Division, which has been operating at a loss for the last several years. The most recent City Division income statement follows. The CEO has asked for your advice on shutting down the City Division's operations. If the City Division is eliminated, corporate administration is not expected to change, nor are any other changes expected in the operations or costs of the Mall Division. BETTY'S FASHIONS, CITY DIVISION Divisional Income Statement For the Year Ending January 31 Sales revenue Costs Advertising-City Division Cost of goods sold Divisional administrative salaries Selling costs (sales commissions) Rent Share of corporate administration Total costs Net loss before income tax benefit Tax benefit at 40% rate Net loss. $8,600,000 350,000 4,300,000 580,000 1,160,000 1,470,000 950,000 $8,810,000 $ (210,000) 84,000 $ (126,000) Required: a. Using the worksheet below, determine which revenues and costs are probably differential for the decision to discontinue City Division's operations. b. What will be the effect on Betty's profits if the division is eliminated? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Using the worksheet below, determine which revenues and costs are probably differential for the decision to discontinue City Division's operations. BETTY'S FASHIONS, CITY DIVISION Divisional Income Statement Differential Revenues and Costs For the Year Ending January 31 $ Sales revenue Differential 8,600,000 Costs Advertising - City division 350,000 Differential Cost of goods sold 4,300,000 Differential Divisional administrative salaries 580,000 Differential Selling costs (sales commissions) 1,160,000 Differential Rent 1,470,000 Differential Share of corporate administration Total costs Net differential gain before income tax expense Tax expense at 40% rate Net differential gain from store 210,000 84,000 Differential $ 126,000 0 Not differential $ 7,860,000 Required: a. Using the worksheet below, determine which revenues and costs are probably differential for the decision to discontinue City Division's operations. b. What will be the effect on Betty's profits if the division is eliminated? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B What will be the effect on Betty's profits if the division is eliminated? Betty's profits will decrease by $ 126,000