Fundamentals of Cost Accounting 2nd Edition by William Lanen, Carolyn Wells, Michael Maher

Exercise 22

Cost Data for Managerial Purposes
TriState Department Stores operates retail stores in both downtown (City) and suburban (Mall) locations. The company has two responsibility centers: the City Division, which contains stores in down-town locations, and the Mall Division, which contains stores in suburban locations. TriState's CEO is concerned about the profitability of the City Division, which has been operating at a loss for the last several years. The most recent income statement follows. The CEO has asked for your advice on shutting down the City Division's operations. If the City Division is eliminated, corporate administration is not expected to change, nor are any other changes expected in the operations or costs of the Mall Division.

Required
What revenues and costs are probably differential for the decision to discontinue this division's operations What will be the effect on TriState's profits if the division is eliminated