Home Gifts has three sales departments: dishes, clothing, and paper products. The stores condensed income statement for the year ended December 31, 20X1, is shown below:

HOME GIFTS Condensed Income Statement Year Ended December 31, 20X1
	Dishes				Clothing		Paper Products
Sales	$	273,000		$	91,000			$	63,000
Cost of goods sold		78,400			41,900				32,000
Gross profit	$	194,600		$	49,100			$	31,000
Operating expenses
Direct expenses	$	50,000		$	14,400			$	9,500
Indirect expenses		19,600			8,400				3,900
Total operating expenses		69,600			22,800				13,400
Net income	$	125,000		$	26,300			$	17,600

The proprietor asked the auditor if the Clothing and/or Paper Products departments should be closed. In the opinion of both the owner and the auditor, if the Clothing department is closed, the total indirect expenses could possibly be reduced to $18,400. If only the Paper Products department is closed, the indirect expenses could possibly be reduced to a total of $23,500. In the opinion of the owner, if the Paper Products department is closed, a loss of $9,500 in sales could be lost by the Dishes department. This loss in sales would reduce the Dishes Cost of Goods Sold by $3,900. She also thinks that closing the Paper Products department would have no effect on sales of the Clothing department. Required:

1. Based on the preceding information, what would the estimated total profit or loss be if the Paper Goods department were closed?
2. What would the estimated total profit or loss be if the Clothing department were closed?

Analyze: What is the current contribution margin for each department?