The Operations of Plastics Inc Required: A

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: $\begin{array}{lrrr}&\text { Blow Moulding } & \text { Injection } \\&\text { Division } & \text { Moulding } \\&&\text { Division }&\text { Total }\\\text { Sales } & \$ 60,000 & \$ 40,000 & \$ 100,000 \\\text { Variable costs } & 20,000 & 15,000 & 35,000 \\\text { Contribution margin } & \$ 40,000 & \$ 25,000 & \$ 65,000 \\\text { Direct fixed costs } & 12,500 & 30,000 & 42,500 \\\text { Segment margin } & \$ 27,500 & \$(5,000) & \$ 22,500 \\\text { Allocated common costs } & 10,000 & 7,500 & 17,500 \\\text { Operating income (loss) } & \$ 17,500 & \$(12,500) & \$ \$ 5,000\end{array}$ Required: 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?