CGA Corp. is a distributor of industrial spare parts used by manufacturers to maintain their customers production equipment. CGA has 15 divisions throughout the country. One of CGAs divisions had the following partial income statement:

Sales	$120,000,000
Cost of Goods Sold	($90,000,000)
	___________
Gross Profit	$30,000,000
Sales, general, administrative expenses	($20,000,000)
Corporate allocation costs	($25,000,000)
	_____________
Operating Income	($15,000,000)

CGA allocates corporate costs to divisions for headquarters functions such as HR, IT, and finance. A common practice used by many large organizations. These functions are sometimes referred to as shared services. For CGA, they determine each divisions allocation share based on headcount.

At a senior leadership meeting you were attending, one of the VPs said the following:

We need to shut down this division as these poor results have been about the same for the last 3 years when we opened it. We are losing money.

QUESTION

What concerns do you have about the statement made by the VP?

How would shutting down this division potentially impact the profitability of CGA overall?