1. Gobez building materials manufacturing company is organized into three departments which are engaged in different business lines. Presented below is the 2015 income statement for the company.

Particulars	Department -A	Department-B	Department-C
Sales Variable manufacturing cost Variable selling & admin. Costs	$200,000 ($125,000) ($15,000)	$125,000 ($90,000) ($10,000)	$145,000 ($80,000) ($15,000)
Contribution margin Fixed manufacturing costs Fixed selling & admin. Cost	$60,000 ($30,000) ($15,000)	$25,000 ($20,000) ($15,000)	($50,000) ($25,000) ($10,000)
Operating income	$15,000	($10,000)	($15,000)

The manufacturing of the company is considering dropping department-B because it seems to be unprofitable. Assume that 90% of the fixed manufacturing costs and 50% of fixed selling administrative costs of department B are allocated costs and will continue even if this department is discontinued.

Instructions:

1. Assuming that the vacated facilities are left idle if department B is discounted, should the company drop department B?
2. Assuming that the vacated facilities can be used to expand department C which results in the department Cs sales to in cease by 30%. This requires the company to increase departments Cs specific fixed costs by $8,000. Should the drop department B?