4. Segment Elimination (Differential Analysis) (5 POINTS)

29. The following is a consolidated Income Statement for TreeTop Pruning.

PER MONTH	GEOGRAPHIC SEGMENT
	Sharpstown	Cypress	Pasadena	TOTAL
Sales	$20,000	$18,000	$12,000	$48,000
TVC	(5,000)	(2,000)	(6,000)	(13,000)
TCM	15,000	16,000	6,000	35,000
FC:
Salaries	2,000	2,000	2,000	6,000
Advertising	1,000	1,000	1,000	3,000
Administrative	1,000	1,000	2,000	4,000
Depreciation	500	800	1,000	2,300
Rent	1,000	1,500	5,000	7,500
Other	2,000	1,000	1,000	4,000
Total FC	(7,500)	(7,300)	(12,000)	(26,800)
Net Income	7,500	8,700	(6,000)	8,200

If the Pasadena segment is eliminated, advertising, administrative, and rent will be eliminated entirely, and the rest of the Pasadena fixed costs will be decreased by 50%.

Required: Calculate the net change in monthly Net Income for the consolidated entity if the Pasadena Office is eliminated.

tayping

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