Fantum Ltd has three operating divisions. The expected financial results of eachdivision next year are as follows:Division A Division B Division CSales50,00030,00040,000Variable costs(30,000)(18,000(20,000)Specific fixed cost(12,000)(10,000)(10,000)Apportioned head office costs(5,000)(4000)(5000)Profit or loss3,000(2000)5000Required:Taking only the financial results next year into consideration, recommendwhether or not division Y should be closed down.Example 4 Jones LtdJones Ltd operates three divisions within a largercompany. The CEO has beenshown the latest profit statements and is concernedthat division C is losingmoney.You are required to advise her whether or not to close down division C.DivisionABC(000s)(000s)(000s)Sales1008040Variable costs605030Fixed costs202020Profit/(loss)2010(10)You are also informed that 40% of the fixed cost isproduct specific, the remainderbeing allocated arbitrarily to the divisions from head office.Required:Should division C be shut down?