7T-11

Shirley Inc. has three divisions, King, West and Gold. All fixed costs are unavoidable. Following is the income statement for the previous year: King West Gold Total Sales $994,000 $584,500 $426,000 $2,004,500 Variable costs 415,000 344,600 300, 300 1,059,900 Contribution Margin 579,000 239,900 125, 700 944,600 Fixed Costs (allocated) 390,000 197,625 153, 375 741,000 Profit Margin $ 189,000 $ 42,275 $ 127,675) 203,600 a. What would Shirley's profit margin be if the West division were dropped? b. What would Shirley's profit margin be if the Gold division were dropped