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Dropping a Division

The following information relates to next year's projected operating results of the JCB Aluminum Division of WILDA Corporation:
Contribution margin $1500,000
Fixed expenses $1700,000

Net operating loss $(200,000)

If JCB Aluminum Division is dropped, $1,000,000 of the above fixed costs would be eliminated. What will be the effect on WILDA's CORP profit next year if jcb Aluminum Division is dropped instead of being kept?

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Contribution margin 0 (since JCB Aluminum Division is dropped)
Fixed expenses ...

Solution Summary

The solution evaluates the effect on the profits due to the proposed dropping a division.