should the eastern division be dropped show all supporting calculations.

A B A1 The Cook Company has two divisions: Eastern and Western. The divisions have the following revenues and expenses: D E The Cook Company has two divisions: Eastern and Western. The divisions have the following revenues and expenses: G H 1 2 3 4 5 Sales Variable costs Traceable fixed costs Allocated corporate costs Eastern Western $1,100,000 $1,000,000 $550,000 $400,000 $360,000 $300,000 $340,000 $270,000 6 7 8 Operating income (loss) $150,000 $30,000 9 Management is considering dropping the Eastern Division and operating only out of the Western Division. If the Eastern Division were dropped, its direct fixed costs could be avoided. Western Division sales are 10 expected to decrease by 10% if the Eastern Division is dropped and allocated corporate costs would be reduced by $280,000 as two senior managers would have to be let go. 11 Required: Should the Eastern Division be dropped? Show all supporting calculations. (5 marks) 3 1 2 Overall increase (decrease) in operating income 3 Answer: 4 -5 26 Reason