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Determine the operating income for plastics ltd.

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Reference no: EM133535464

Question: The operations of Plastics Ltd. are divided into the Blow Moulding Division and the Injection Moulding Division. Projections for the next year are as follows:

 

 Blue Moulding Division

 Injection Moulding Division

 Total

  Sales

 $60,000

 $40,000

 $100,000

  Variable Costs

 20,000

 15,000

 35,000

  Contribution Margin

 $40,000

 $25,000

 $65,000

  Direct Fixed Costs

 12,500

 30,000

 42,500

  Segment Margin

 27,500

 (5,000)

 22,500

  Allocated Common Costs

 10,000

 7,500

 17,500

  Net Operating Income (Loss)

 $17,500

 $(12,500

 $5,000

Required:

A. Determine the operating income for Plastics Ltd. as a whole if the Injection Moulding Division is dropped.

B. Should the Injection Moulding Division be eliminated? What is the financial impact of this decision?

 

Reference no: EM133535464

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