Beta Company has two divisions, Wizards and Wands. Beta is considering discontinuing Wands, due to the divisions continuing operating losses. Betas current income statement is presented below.

If Wands is discontinued, all employees of the division will be laid off. General expenses are allocated based on sales dollars and are not directly related to individual product lines.

Total Wizards Wands

Sales $1,000,000 $800,000 $200,000

Variable manufacturing and selling expenses 500,000 350,000 150,000

Contribution Margin $ 500,000 $450,000 $ 50,000

Fixed Expenses:

Direct (traceable) advertising $ 18,000 $ 12,000 $ 6,000

Product line managers salaries 100,000 60,000 40,000

General expenses 90,000 67,500 22,500

Total fixed expenses $ 208,000 $139,500 $ 68,500

Net operating income (loss) $ 292,000 $310,500 ($18,500)

The financial advantage (disadvantage) of discontinuing Wands is:

a		$ 18,500
b		$ 22,500
c		($ 4,000)
d		$ 27,500