Question 3 (30 marks)

A- ABC Corporation has two divisions--Women and Men. The divisions have the following revenues and expenses:

	Women			Men
Sales	$	100,000		$	110,000
Variable costs		40,000			57,000
Traceable fixed costs		30,000			36,000
Allocated common corporate costs		27,000			34,000
Net income (loss)	$	3,000		$	(17,000)	)

The management of ABC is considering the elimination of the Men Division. If the Men Division were eliminated, its traceable fixed costs could be avoided. Total common corporate costs would be unaffected by this decision.

Required:

1- Should the Company drop Men division? Explain in light of the effect of your decision on the company profitability. (Support you answer with the necessary calculations).

2- Will your decision be changed if you know that all traceable fixed costs to Men division could be avoided and 40% of total common corporate costs assigned to Men division would be unaffected by this decision. (Support you answer with the necessary calculations). (12 marks)