URL services has two divisions. Basic webpages and custom webpages. Ricky Vega, Custom's manager wants to find out why Custom is not profitable. He has prepared the following reports.

URL Services

Segmented Income Statement

For the year ended December 31

[Basic Webpages(BW)] [Custom Webpages(CW)] [Total Company(TC)]

(BasicWeb 1000 units) (Cust.Web 200 units)

Basic Revenue [BW$200,000] : [CW$150,000] : [TC$350,000]

Less Variable Costs

Direct professional labor: design BW$32,000:CW$80,000:TC$112,000

Direct professional labor: install BW30,000:CW4,000 :TC34,000

Direct professional labor: maintain 15,000: 36,000 :51,000

Total Variable Costs $77,000: $120,000: $197,000

Contribution margin $123,000: $30,000: $153,000

Less direct fixed cost

Depreciation on computer equipment $6,000: $12,000: $18,000

Depreciation on servers 10,000: 20,000: 30,000

Total direct fixed costs $16,000: $32,000: $48,000

Segment margin $107,000: $(2,000): $105,000

Less common fixed costs:

Building rent TC$24,000

Supplies TC1,000

Insurance TC3,000

Telephone TC1,500

Website rentalTC 500

Total common fixed costs TC$30,000

Operating income TC$75,000

URL Services

Custom Webpages Division

Incremental Analysis

Design Install Maintain Total

Service revenue $60,000 $25,000 $65,000 $150,000

LEss cariable costs 80,000 4,000 36,000 120,000

Contribution Margin $(20,000) $21,000 $29,000 $30,000

Less direct fixed costs 6,000 13,000 13,000 32,000

Segment margin $(26,000) $8,000 $16,000 $(2,000)

1. How will URL Services be affected if the Custom Webpages Division is eliminated?

2. How will URL Services be affected if the Design segment of Custom Webpages is eliminated?

3.What should Ricky Vega do? What additional info rmation would be helpful to him in making the decision?