The High School Musical Company has two divisions Troy and Gabriella. In the previous year, Troy generated sales revenue of $300,000 and had total traceable costs of $80,000, $20,000 of which was fixed. Gabriella generated a segment margin of $30,000. Common fixed costs totaled $170,000; $50,000 of this amount was allocated to the Gabriella division. Management is considering the elimination of the Gabriella division since it has shown an operating loss for the past several years.

If Gabriella is dropped, the company would open a new division in its place. The new division would generate $175,000 in sales revenue and have a contribution margin percentage equal to 60%. The new divisions traceable fixed costs would total $25,000. In addition, it is projected that opening the new division would increase Troys sales volume by 3%.

Which of the following statements is correct with regard to the above information? (each statement is independent)

A.

If Gabriella is dropped and replaced with the new division, the company's operating income would increase by $57,200.

B.

Troy's contribution margin percentage increases by 3% if Gabriella is dropped and replaced with the new division.

C.

The company's operating income will differ depending on if the income statement is prepared using the traditional approach or the contribution margin approach.

D.

The company's common fixed costs would decrease by $50,000 if Gabriella is dropped.

E.

Total traceable costs for the new division is $25,000.