Jane Chou, president of Fitter, was concerned about one of the company's divisions - Caltis. Caltis division's most recent quarterly income statement is as follows: Sales $3,751,500 Less: Cost of goods sold (includes variable and $2,722,400 fixed cost) Gross Profit $1,029,100 Less: Selling and administrative expenses $1, 100,000 (includes variable and fixed cost) Operating (loss) $ (70,900) Units sold 41,000 Jane is giving serious consideration to shutting down the Calits division because this is the tenth consecutive quarter that it has shown a loss. To help her in her decision, the following additional information has been gathered: Caltis division produces one product at a selling price of $100 to outside parties Caltis division sells 50% of its output to another division (Decker) within the company for $83 per unit (full manufacturing cost plus 25%). The internal price is set by company policy. If Caltis division is shut down, Decker division will buy the part externally for $100 per unit. The fixed overhead assigned to cost of goods sold per unit is $20. There is no alternative use for the facilities if shut down. The facilities and equipment will be sold and proceeds invested to produce an income of $25,000 per quarter. Of the fixed selling and administrative expenses, 30% represent allocated expenses from corporate headquarters. Variable selling expenses are $5 per unit sold for units sold externally. These expenses are avoided for internal sales. . No variable administrative expenses are incurred. REQUIRED What will be the effect on the company's profits if the division is closed? Should the president shut down the division? (15 marks)