Exercise #3: Worthy Consultants Inc. Worthy Consultants Inc. (WCI) evaluated the operating performance of a company's six divisions, and assembled the following information for presentation to the Board of Directors: Sales Cost of goods sold Gross profit Operating expenses Net income X Division $ 96,200 76.470 19,730 43.600 S (23.870) Other Divisions 1,664,200 978,520 685,680 527.940 S 157.740 TOTAL $ 1,760,400 1,054.990 705,410 571.540 $ 133.870 Based on this information, WCI proposed that X Division be shut down so as to increase the profitability of the company by $23,870. A board member asked for a breakdown of X Division's costs and the following information was provided: Fixed Cost* $ 6,470 Variable Cost $ 70,000 Cost of goods sold TOTAL 76,470 S Operating expenses 28,600 15,000 Total Costs S 35.070 S 85.000 s * none of the fixed costs would be eliminated with the closure of X Division 43.600 120.070 Required: If you were the board member, would you vote for the closure of X Division? Explain