ABC Company's management wants to determine if Division B should be eliminated. The following data are available (in thousands)

ABC Company's management wants to determine if Division B should be eliminated. The following data are available (in thousands):

Contribution Margin Income Statement

Division A       Division B       Division C       Total

Sales                                        $800                $800                1,028               $2,800

Less variable costs                   560                  500                  720                  1,780

Contribution margin                 $240                $300                $480                $1,020

Less direct fixed costs                         140                  340                  240                  720

Segment margin                       $100                ($40)                $240                $ 300

Less common fixed costs                                                                                180

Operating income                                                                                            120

A. Assuming all direct fixed costs of Division B are avoidable (traceable), what would be the change in operating income if Division B were eliminated?

B. Assuming one-half of the direct fixed costs of Division B are avoidable, what would be the change in operating income if Division B were eliminated?

C. If Division A’s sales increase $80,000, the overall company net income will be?

D. If a promotional program at Division A costing $25,000 increases sales by $80,000, Should they go with the promotional program?

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