Operations of Borderland Oil Drilling Services are separated into two geographical divisions: United States and Mexico. The operating results of each division for the year are as follows:

United States Mexico Total

Sales $$7,200,000$ $$3,600,000$ $$10,800,000$

Variable costs $(4,740,000)(2,088,000)(6,828,000)$

Contribution margin $$2,460,000$ $$1,512,000$ $$3,972,000$

Direct fixed costs $(800,000)(490,000)(1,290,000)$

Segment margin $$1,660,000$ $$1,022,000$ $$2,682,000$

Corporate fixed costs $(1,900,000)(890,000)(2,790,000)$

Operating income $($loss$)$ $$(240,000)$ $$132,000$ $$(108,000)$

Corporate fixed costs are allocated to the divisions based on relative sales. Assume that all of a division$$s direct fixed costs could be avoided by eliminating that division. Because the U$.$S$.$ division is operating at a loss, Borderland$$s president is considering eliminating it$.$

a$.$ If the U$.$S$.$ division had been eliminated at the beginning of the year, what would have been Borderland$$s pre$-$tax income? $

Answer

b$.$ Recast the income statements into a more meaningful format than the one given.

Note: Use a negative sign for expenses and losses.