8. The Milham Company has two divisions - East and West. The divisions have
the following revenues and expenses:
Sales
East
West
$720,000 $350,000
Variable costs
370,000 240,000
Traceable fixed costs.
130,000 80,000
Allocated common corporate costs
120,000 50,000
Net operating income (loss) ...
$100,000 $ (20,000)
Management at Milham is pondering the elimination of the West Division since it
has shown an operating loss for the past several years. If the West Division were
eliminated, its traceable fixed costs could be avoided. Total common corporate
costs would be unaffected by this decision. Prepare an analysis and
recommendation regarding the proposed elimination of West Division.