a. Austin Industries has four divisions in two separate geographical areas. In the center region, the two divisions are Omaha and Kansas City. The southwest region has the other two divisions: Dallas Division and Houston Division. Information relating to the divisions for the current year is as follows:

Further analysis indicates that any attempt to eliminate any division within a given region is expected to reduce the sales of the companion division by at least 20%. For example, if either Omaha or Kansas City division is dropped, the other division would see a 20% decline in sales. The same impact would be felt by the southwest region. If either Dallas or Houston division was dropped, the other division would see a similar drop in sales. Since KC is showing a significant loss, top management is considering dropping that division. Show the impact of such a decision by reworking the segment report provided below.
b. Based on your analysis above, should the company dropKC?

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Omaha 660000 495000 165000 140000 25000 Kansas City 832000 704000 128000 160000 -32000 Dallas 600000 440000 160000 100000 60000 Houston Total Sales Variable expenses per unit Contribution margin Direct fixed expenses Segment margn Common fixed costs Operating income 783000 2875000 435000 2074000 348000 801000 145000 545000 203000 256000 250000 6000