The Operations of Grant Ltd ADetermine Operating Income for Grant Ltd

Essay

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