Beige Computers operates retail stores in both downtown (City) and suburban (Mall) locations. The company has two responsibility centers: the City Division, which contains stores in downtown locations, and the Mall Division, which contains stores in suburban locations. Beige's CEO is concerned about the profitability of the City Division, which has been operating at a loss for the last several years. The most recent income statement follows. The CEO has asked for your advice on shutting down the City Division's operations. If the City Division is eliminated, corporate administration is not expected to change, nor are any other changes expected in the operations or costs of the Mall Division.

Required
What revenues and costs are probably differential for the decision to discontinue City Division's operations? What will be the effect on Beige's profits if the division iseliminated?

BEIGE COMPUTERS, CITY DIVISION DIvlelonal Income Statement For the Year Endlng January 31 $12,900,000 Costs Advertising-City Division. Cost of goods sold Divisional administrative salaries... Selling costs (sales commissions) . 525,000 6,460,000 870,000 1,730,000 Share of corporate administration. 1,425,000 $13,215,000 Total costs. Net loss before income tax benefit.....-. ....$ (315,000) 126,200 Tax benefit at 40% rate. S (189,000)