BELLE has two departments hardware and software, within its retail business. The most recent monthly data are as follows:

................................ Hardware ($) ........... Software ($)

Sales ..............................200,000...........100,000

Variable expenses.........120,000...........80,000

Fixed expenses .............140,000...........40,000

BELLE is considering shutting down software departments for which they expect that a 10% reduction of sales will occur at hardware department. The manager has also indicated that $20,000 fixed expenses will continue to incur even if software department is shut down.

Required:

(7 marks) - (a) Should BELLE continue with the operation of software department or shut down?