Clearly label computations and answers to problems. Financial statements should be prepared in proper form. SHOW ALL WORK!

Ainsley Corporation has four operating divisions. The budgeted revenues and expenses for each division for 2014 follows:

	Division
	A	B	C	D
Sales	$504,000	$948,000	$960,000	$1,240,000
Cost of goods sold	440,000	930,000	765,000	925,000
Selling, general, and administrative expenses	96,000	202,500	144,000	210,000
Operating income/loss	$(32,000)	$(184,500)	$(51,000)	$(105,000)

Further analysis of costs reveals the following percentage of variable costs in each division:

Cost of goods sold 90% 80% 90% 85%

Selling, general, and administrative expenses 50% 50% 60% 60%

Closing down any division would result in savings of 40% of the fixed costs of the division.

Top management is very concerned about the unprofitable division (A and B)and is considering closing them for the year.

1.) Calculate the increase or decrease in operating income if Ainsley closes division A.

2.) Calculate the increase or decrease in operating income if Ainsley division B.

3.) What other factors should the top management of Ainsley consider before making a decision?