United Association of America has recently received the financial statements of its food supply division which has a chain of groceries with three main departments: Meats: Groceries and Produce. Last year's results showed the following: Meat Groceries Produce Totals $ $ $ $ Sales 45,000 15,000 9,000 69,000 Less: Variable Costs 35,000 9,000 7.000 51.000 Contribution Margin 10,000 6,000 2,000 18,000 Less: Fixed Costs Salaries 3,000 2,450 1,150 6,600 Utilities & Miscellaneous 1,400 550 850 2,800 Administration 2,600 1,600 1,000 5.200 Total Fixed Costs 7.000 4,600 3,000 14,600 Net Operating Income /(Loss) 3,000 1,400 (1,000) 3,400 The following additional information is supplied about the fixed costs: 1. Salaries - 40% of the staff employed in the Produce department will be transferred to other departments. The remainder will be dismissed. ii. Administration - There will be an overall saving of $350 in these costs. ill. There will be no reduction in the Utilities & Miscellaneous Costs. United Association of America is of the view that the Produce Department should be eliminated as it continues to suffer losses. However, the Finance and Accounting Manager disagrees with this position. Required: Prepare an analysis showing whether it is more profitable to eliminate the Produce department