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Rock Incorporated has three divisions, Granite, Lime and Nina. All fixed costs are common and unavoidable. Following is the income statement for the previous year:

	Granite	Lime	Nina	Total
Sales revenue	$ 518,000	$ 272,500	$ 226,000	$ 1,016,500
Variable costs	178,000	124,600	100,900	403,500
Contribution/segment margin	$ 340,000	$ 147,900	$ 125,100	$ 613,000
Common fixed costs (allocated)	268,000	165,250	109,750	543,000
Net operating income (loss)	$ 72,000	$ (17,350)	$ 15,350	$ 70,000

What would Rock's income (loss) be if the Lime Division were dropped?

What would Rock's income (loss) be if the Nina Division were dropped?

2.

Capitol, Incorporated, has received a special order for 2,110 units of its product at a special price of $150. The product normally sells for $211 and has the following manufacturing costs:

	Cost per Unit
Direct materials	$ 50
Direct labor	30
Variable manufacturing overhead	20
Fixed manufacturing overhead	40
Total unit cost	$ 140

Assume that Capitol has sufficient capacity to fill the order without harming normal production and sales.

If Capitol accepts the order, what effect will the order have on the companys short-term profit?

What minimum unit price should Capitol charge to achieve a $40,000 incremental profit?

Now, assume Capitol is currently operating at full capacity and cannot fill the order without harming normal production and sales. If Capitol accepts the order, what effect will the order have on the companys short-term profit?

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