Tri-Cities Inc. has three divisions: Boone, Lenoir, and Hickory. The results of August, 2012 are presented below.

All of the allocated costs will continue even if a division is discontinued. Tri-Cities allocates indirect fixed costs based on the number of units to be sold. Since the Lenoir division has a net loss, Tri-Cities feels that it should be discontinued. Tri-Cities feels if the division is closed, that sales at the Boone division will increase by 10%, and that sales at the Hickory division will stay the same.
Instructions
(a) Prepare an analysis showing the effect of discontinuing the Lenoir division.
(b) Should Tri-Cities close the Lenoir division? Briefly indicate why or why not.