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Discontinued Segment or Operation A company has an unprofitable division for the current year: Sales 75,000 Cost of Goods Sold 50,000 Gross Profit 25,000 Selling
Discontinued Segment or Operation
A company has an unprofitable division for the current year:
Sales | 75,000 |
Cost of Goods Sold | 50,000 |
Gross Profit | 25,000 |
Selling and Admin | 80,000 |
Income from operations | (55,000) |
Fixed costs are 40% for cost of goods sold and variable costs are 60% of the selling and admin expenses. The Company assumes that fixed costs would not be affected if the division were discontinued. Using a differential analysis, determine if the division should be retained.
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