The Operations of Plastics Inc A Determine Operating Income for Plastics Inc

question 40

Essay

The operations of Plastics Inc.are divided into the Blow Moulding Division and the Injection Moulding Division.Projections for the next year are as follows:
Required:
$\begin{array}{lrrr}&\text { Blow Moulding } & \text { Injection } & \\&&\text { Moulding } & \\&\text { Division } & \text { Division } & \text { Total }\\\text { Sales } & \$ 60,000 & \$ 40,000 & \$ 100,000 \\\text { Variable costs } & 20,000 & 15,000 & 35,000\\\text { Contribution margin } & \$ 40,000 & \$ 25,000 & \$ 65,000 \\\text { Direct fixed costs } & 12,500 & 30,000 & 42,500\\\text { Segment margin } & \$ 27,500 & \$(5,000) & \$ 22,500 \\\text { Allocated common costs } & 10,000 & 7,500 & 17,500 \\\text { Operating income (loss) }&\$17,500&\$12,500&\$5,000\end{array}$ A. Determine operating income for Plastics Inc. as a whole if the Injection Moulding Division is dropped.
B. Should the Injection Moulding Division be eliminated?