(SHOW ALL COMPUTATIONS or no credit given)

7. (10 points) J.M Smucker Company operates two divisions, the Fruit Preserves Division and the Snack Foods Division. The Fruit Preserves Division manufactures and sells jelly and jams to supermarkets. The Snack Foods Division sells its products to theme parks. The company is considering disposing of the Snack Foods 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, 2017 are presented below: Fruit Preserves Division Snack Foods Division Total Sales revenue Cost of goods sold Gross profit Selling & admin expenses Net income $1,663,240 978,030 685,210 526,990 158,220 $100,350 76,440 23,910 49,750 $(25,840) $1,763,590 1,054,470 709,120 576,740 $ 132,380 In the Snack Foods Division, $60,200 of the cost of goods sold are variable costs and $25,500 of selling and administrative expenses are variable costs. The management of the company feels that none of the fixed costs will be eliminated if it discontinues operation of the Snack Foods Division Instructions (a) Determine whether the company should discontinue operating the Snack Foods Division. Prepare a schedule which supports your decision. (b) If the company had discontinued the division for 2017, compute what net income would have been