Dropping a Segment

The Everest Company has two divisions$$Northern and Southern. The divisions

have the following revenues and expenses:

Northern Southern Total

Sales $$550,000$ $$500,000$ $$1,050,000$

Variable Costs $275,000200,000475,000$

Direct Fixed Costs $180,000150,000330,000$

Allocated Corporate Costs $170,000135,000305,000$

Net Income $<$$$75,000>$ $$15,000<$$$60,000>$

The management of Everest is considering the elimination of the Northern

Division. If the Northern Division were eliminated, the direct fixed costs

associated with this division could be avoided. However, corporate costs would

still be $$305,000$ in total. Given these data, compute the effect to total company

net income if the Northern Division is eliminated