National Industries is a diversified corporation with separate operating divisions. Each division's performance is evaluated based on its total dollar profits and return on division investment.

The WindAir division manufactures and sells air conditioners. The coming year's budgeted income statement, based on a sales volume of 15,000 units, is as follows:

WINDAIR DIVISION Budgeted Income Statement For the Fiscal Year Sales revenue $400 $6,000 Manufacturing costs Compressor 70 1,050 Other raw materials 37 555 Direct labour 30 450 Variable overhead 45 675 Fixed overhead 32 480 costs Total manufacturing 214 3,210 Gross margin 186 2,790 Operating expenses Variable selling 18 270 Fixed selling 19 285 Fixed administration 38 570 Total operating expenses 75 1,125 Net income before taxes $1 1 1 $1,665 COMPRESSOR DIVISION Budgeted Income Statement For the Fiscal Year Sales revenue $100 $6,400 Manufacturing costs Raw materials 12 768 Direct labour 8 512 Variable overhead 10 640 Fixed overhead 11 704 costs Total manufacturing 41 2,624 Gross margin 59 3,776 Operating expenses Variable selling 6 384 Fixed selling 4 256 Fixed administration 7 448 Total operating expenses 17 1,088 Net income before taxes $42 $2,688