Question
Week-Long Inc. had 4 divisions and one of the division, Toronto, was operating at a loss. The financial report showed the following. The Other Three
Week-Long Inc. had 4 divisions and one of the division, Toronto, was operating at a loss. The financial report showed the following. The Other Three Divisions Toronto Total Sales revenue $1,664,200 $96,200 $1,760,400 Cost of goods sold 978,520 76,470 1,054,990 Gross profit 685,680 19,730 705,410 Operating expense 527940 43600 571,540 Net income $157,740 -$23,870 $133,870 In the Toronto division, the cost of goods sold is $70,000 variable and $6,470 fixed, and operating expenses are $15,000 variable and $28,600 fixed. None of Toronto division's fixed costs will be eliminated if the division is eliminated. (a) Prepare an incremental analysis for the keep or drop decision. Show all workings (10 marks) (b) Should Week-Long Inc. keep or drop the Toronto division? Explain. (2 marks)
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