Three Initial Corporation (TIC) is considering selling off the XYZ Division. The following table presents the data used in the decision. Calculate the net effect on before-tax profits if the sale is completed. 456 123 $200,000 (50,000) 150,000 $80,000 (60,000) 20,000 XYZ $25,000 (20,000) 5,000 TOTAL $305,000 (130,000) 175,000 Sales Variable Costs Cont. Margin Fixed Costs Salaries Advertising Administrative Depreciation R & D Other 20,000 2,000 3,000 6,000 5,000 6,000 5,000 500 2,000 2,000 5,000 2,000 4,000 3,000 1,000 2,000 1,000 100 29,000 5,500 6,000 10,000 11,000 8,100 All relevant variable costs will be eliminated with the sale. Additionally, half of the salaries and administrative costs will be eliminated, and all of the depreciation and R&D costs will be eliminated. The other costs will be absorbed by the remaining segments. |