NSX Corporation operates two divisions, the Fish Division and the Shrimp Division. The Fish Division manufactures and sells caps. The Shrimp Division operates tennis for women. The company is considering close and disposing of the Shrimp Division since it has been consistently unprofitable for a number of years. The income statements for the two divisions for the year ended December 31, 2015 are presented below:

Fish Division Shrimp Division Total

Sales $1,500,000 $500,000 $2,000,000

Cost of goods sold 900,000 350,000 1,250,000

Gross profit 600,000 150,000 750,000

Selling & administrative expenses 250,000 180,000 430,000

Net income $ 350,000 $ (30,000) $ 320,000

In the Shrimp Division, 70% of the costs of goods sold are variable costs and 35% of selling and administrative expenses are variable costs. The management of NSX feels it can save $45,000 of fixed cost of goods sold and $50,000 of fixed selling expenses if it discontinues operation of the Shrimp Division.

Instructions

1. Determine whether the company should discontinue operating the Shrimp Division.

2. If the company had discontinued the division for 2015, determine what net income would have been.