The president of Truman, Inc., attended a seminar about the contribution margin model and returned to her company full of enthusiasm about it. She requested that last years traditional model income statement be revised, and she received the following report:

The president was told that the fixed expenses of $154,000 included $88,500 that had been split evenly between divisions because they were general corporate expenses. After looking at the statement, the president exclaimed, "I knew it! Division B is a drag on the whole company. Close it down!"