First Rate Corporation has four operating divisions. The budgeted revenues and expenses for each division for 2017 follows: (Click to view the results of each division.) Closing down any division would result in savings of 50% of the fixed costs of that division. Top management is very concerned about the unprofitable divisions (A and B) and is considering closing them for the year. Read the requirements. Requirement 1. Calculate the increase or decrease in operating income if First Rate closes division A. Begin by calculating Division A's contribution margin. Division A - X Data Table Sales Variable cost of goods sold Variable selling, general, administrative expenses Division Contribution margin B D Sales $ Cost of goods sold 625,000 $ 550,000 120,000 440,000 $ 375,000 100,000 970,000 $ 610,000 260,000 780,000 440,000 205,000 Requirements - Selling, general, and administrative expenses $ (45,000 $ (35,000) $ 100,000 $ 135,000 Operating income/loss Further analysis of costs reveals the following percentages of variable costs in each division: 1. Calculate the increase or decrease in operating income if First Rate closes division A. 2. Calculate the increase or decrease in operating income if First Rate closes division B. 3. What other factors should the top management of First Rate consider before making a decision? Division B A D 92 % 95 % 95 % 86 % Cost of goods sold Selling, general, and administrative expenses 59 % 79 % 70 % 68 % Print Done Print Done