a) A merchandising company has two departments, 101 and 102. A recent monthly income statement for the company follows: Department 101 102 Total $4,000,000 1,300,000 $3,000,000 900,000 $1,000,000 400,000 Sales Less variable expenses Contribution margin Less fixed expenses Net operating income (loss) 2,700,000 2,200,000 $ 500,000 2,100,000 1,400,000 600,000 800,000 $ 700,000 ($200,000) A study indicates that $340,000 of the fixed expenses being charged to Department 102 are sunk costs or allocated costs that will continue even if department 102 is dropped. In addition, the elimination of Department 102 will result in a 10% increase in the sales of Department 101. If Department 102 is dropped, what will be the effect on the net operating income of the company as a whole? Would you recommend Department 102 be dropped? Briefly explain why. (7 marks)