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Required information The Foundational 1 5 ( Algo ) [ LO 6 - 1 , LO 6 - 2 , LO 6 - 3 ,

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Required information
The Foundational 15(Algo)[LO6-1, LO6-2, LO6-3, LO6-4, LO6-5]
[The following information applies to the questions displayed below.]
Diego Company manufactures one product that is sold for $77 per unit in two geographic regions-East and West. The
following information pertains to the company's first year of operations in which it produced 59,000 units and sold 54,000
units.
The company sold 41,000 units in the East region and 13,000 units in the West region. It determined $330,000 of its fixed
selling and administrative expense is traceable to the West region, $280,000 is traceable to the East region, and the
remaining $52,000 is a common fixed expense. The company will continue to incur the total amount of its fixed
manufacturing overhead costs as long as it continues to produce any amount of its only product.
Foundational 6-14(Algo)
Diego is considering eliminating the West region because an internally generated report suggests the region's total gross margin in
the first year of operations was $122,000 less than its traceable fixed selling and administrative expenses. Diego believes that if it
drops the West region, the East region's sales will grow by 5% in Year 2. Using the contribution approach for analyzing segment
profitability and assuming all else remains constant in Year 2, what would be the profit impact of dropping the West region in Year 2?
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