Problem 3 The Wind Corporation has two divisions--Scarlett and O'Hara. The following financial information is available for the divisions: Sales Variable costs Traceable fixed costs Allocated common corporate costs Net operating income (loss) Scarlett O'Hara $581,000 $475,000 181,000 230,300 173,500 209,000 115,800 178,800 $110,700 $(143,100) Due to repeated periods of losses, Wind's management thinks the O'Hara division is "gone and will be suggesting to its Board of Directors that the O'Hara should be eliminated. If the O'Hara Division were eliminated, certain traceable fixed costs, specifically advertising costs and line management salaries of $39,000 and $70,000, respectively, could be avoided. Total common corporate costs would be unaffected by this decision. a. Prepare a financial analysis of the effects of this decision. b. Do you agree with management's proposal to eliminate the O'Hara division? Explain your opinion and support with references to your analysis