CNECH State University Business School (SUBS) offers several degrees, including Bachelor of Business Administration (BBA). The new dean believes in using cost accounting information to make decisions and is reviewing a staff developed income statement broken down by the degree offered. The dean is considering closing down the BBA program because the analysis, which follows, shows a loss. Tuition increases are not possible. The dean has asked for your advice. If the BBA degree program is dropped, school administration costs are not expected to change, but direct costs of the program, such as operating costs, building maintenance, and classroom costs, would be saved. There will be no other changes in the operations or costs of other programs STATE UNIVERSITY BUSINESS SCHOOL, BBA DEGREE Degree Income Statement For the Academic Year Ending June 20 Revenue Costs Advertising-BBA program 225,000 Faculty salories Degree operating costs (part-time staff) 390,000 Building maintenance 555,000 Classroon costs (building depreciation) 1,275,000 Allocated school administration costs Total costs Net loss $ (150,000) $ 6,000,000 3,060,000 645,000 56,150.000 Required: a. Using the worksheet below, determine which redenues and costs are probably differential for the decision to drop the BBA program b. What will be the net effect on the SUBS contribution (profit) If the BBA program is dropped? program. STATE UNIVERSITY BUSINESS SCHOOL, BBA DEGREE Degree Income Statement Differential Revenues and Costs For the Academic Year Ending June 30 $ Revenue Differential 6,000,000 Costs Advertising - BBA program 225,000 Differential Faculty salaries 3,060,000 Differential Degree operating costs 390,000 Differential Building maintenance 555.000 Differential Classroom costs 1,275,000 Differential Allocated school administration costs 645,000 X Not differential $ Total costs 6,150,000 $ Net differential gain from BBA program X 3.705.000 Required B