URL Services has two divisions: Basic Web Pages and Custom Web Pages. Ricky Vega, manager of Custom Web Pages, wants to find out why Custom Web Pages is not profitable. He has prepared the reports that appear on the shown below.

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

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

3. What should Ricky Vega do? What additional information would be helpful to him in making thedecision?

Segmented Income Statement For the Year Ended December 31 Basic Web Pages Web Pages Total Custom (1,000 unlts) (200 unlts) Company $200,000 $150,000 $350,000 Service revenue Less variable costs Direct professional labor: design 32,000 $ 80,000 112,000 4,000 34,000 Direct professional labor: install Direct professional labor: 30,000 36,000 51,000 77000 $120,000 $197,000 123000 30,000 $153 000 maintain Total variable costs Contribution margin Less direct fixed costs Depreciation on computer S 6,000 12,000 18,000 30,000 16,000 $32,000 48,000 $107,000 02000) $105,000 equipment Depreciation on servers 10,000 20,000 Total direct fixed costs Segment margin Less common fixed costs Building rent Supplies Insurance Telephone Website rental $ 24,000 1,000 3,000 1,500 30000 75,000 Total common fixed costs Operating income Custom Web Pages Division URL Services Segment Profitability Decision Incremental Analysis Design 80,000 6,000 Install MalntalnTotal Service revenue Less variable costs Contribution margin Less direct fixed costs Segment margin $60,000 $25,000 $65,000 $150,000 36,000 20,000 $20,000) $000 $29,000 30,000 4,000 13,000 13,000 $26,000) 8000 $16,000 2000)