8.2 Eisenhower has three divisions: Bud, Wise, and Ser. The results of May, 2008 are presented below: Bud Wise Ser Total Units sold 3,000 5,000 2,000 10,000 Revenue P70,000 P50,000 P40,000 P160,000 Less variable costs 32,000 26,000 16,000 74,000 Less direct fixed costs 14,000 19,000 12,000 45,000 Less allocated fixed costs 6,000 10,000 4,000 20,000 Net income P18,000 (P5,000) P 8,000 P21,000 All of the allocated costs will continue even if a division is discontinued. The company allocates indirect fixed costs based on the number of units to be sold. Since the Wise division has a net loss, the company feels that it should be discontinued. The company feels if the division is closed, sales of Bud division will increase by 20%, and sales for Ser division will stay the same. Required: a. Prepare an analysis showing the effect of discontinuing the Wise division. b. Should the company close the Wise division? Briefly indicate why or why not.