The results of the operating activities of Kobe Company for the current year are as follows:

Based on these results, Kobe is considering discontinuing department C and establishing a new department D. The estimated revenues and expenses of the new department are as follows:
Dept. D
Net sales...........$480,000
Cost of goods sold.........270,000
Direct operating expenses....185,000
In addition, the proposed change will cause total indirect operating expenses to increase by $22,000.
REQUIRED
Determine whether Kobe should discontinue department C and establish departmentD.

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Dept. B Total Dept. A Dept. Net sales Cost of goods sold Gross margin Direct operating expenses Direct operating margin Indirect operating expenses Operating income (loss) $450,000 $1,775,000 $590,000 $735,000 365,000 $225,000 127,000 $ 98,000 545,750 $189,250 267,000 1,177,750 $183,000 $ 597,250 97,000 $ 92,250 209,000 $ (26,000) 433,000 $ 164,250 61,000 $ 37,000 52,000 $ 40,250 133,000 31,250 $ (46,000) $