Ayayai Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $230,500 and the following divisional results.

		Division
		I		II		III		IV
Sales		$245,000		$195,000		$495,000		$443,000
Cost of goods sold		195,000		190,000		295,000		245,000
Selling and administrative expenses		67,500		55,000		55,000		45,000
Income (loss) from operations		$ (17,500)		$ (50,000)		$145,000		$153,000

Analysis reveals the following percentages of variable costs in each division.

		I			II			III			IV
Cost of goods sold		66	%		87	%		77	%		73	%
Selling and administrative expenses		37			57			47			57

Discontinuance of any division would save 50% of the fixed costs and expenses for that division. Top management is very concerned about the unprofitable divisions (I and II). Consensus is that one or both of the divisions should be discontinued.

For the Quarter Ended March 31, 2017 Divisions I III IV Total Sales 245,000 245,000 495,000 495,000 443,000 443,000 1,183, 1,183,000 Variable costs Cost of goods sold T 128,700 227,150 178,850 534,700 Selling and administrative 24.97 25,850 25,650 76,475 Total variable costs T 153,675 T 253,000 I 204,500 611,175 Contribution margin 91,325 242,000T 238,500 571,825 Fixed costs Cost of goods sold 66,300 67,850 66,150 Selling and administrative 42,525 29,150 19,350 Total fixed costs 108,825 97,000 85,500 7x Income (loss) from operations ,558 136,942 134,942 136,941