Bettys Fashions operates retail stores in both downtown and suburban locations. The company has two responsibility centers: the City Division, which contains stores in downtown locations, and the Mall Division, which contains stores in suburban locations. Bettys CEO is concerned about the profitability of the City Division, which has been operating at a loss for the last several years. The most recent City Division income statement follows. The CEO has asked for your advice on shutting down the City Divisions operations. If the City Division is eliminated, corporate administration is not expected to change, nor are any other changes expected in the operations or costs of the Mall Division.

BETTY'S FASHIONS, CITY DIVISION Divisional Income Statement For the Year Ending January 31
Sales revenue	$	8,600,000
Costs
AdvertisingCity Division		350,000
Cost of goods sold		4,300,000
Divisional administrative salaries		580,000
Selling costs (sales commissions)		1,160,000
Rent		1,470,000
Share of corporate administration		950,000
Total costs	$	8,810,000
Net loss before income tax benefit	$	(210,000	)
Tax benefit at 40% rate		84,000
Net loss	$	(126,000	)

Required:

a. Using the worksheet below, determine which revenues and costs are probably differential for the decision to discontinue City Division's operations.

b. What will be the effect on Bettys profits if the division is eliminated?

Betsy's profits wil_______________(Increase or Decrease) by what_________?