A company has two business units (Division 1 and Division 2) that are currently operating as profit centers. Management is evaluating the possibility of discontinuing Division 2 because of the operating losses it has experienced over the last few years. Select information from the operating budget for the upcoming fiscal year is shown below.

Sales Cost of goods sold Gross margin Variable selling and administrative expenses Fixed selling and administrative expenses Operating income (loss) Division 1 Division 2 $800,000 $400,000 300,000 250,000 500,000 150,000 100,000 80,000 75,000 75,000 $325 000 ($5 000)