[The following information applies to the questionsdisplayed below.]

Diego Company manufactures one product that is sold for $75 perunit in two geographic regions—the East and West regions. Thefollowing information pertains to the company’s first year ofoperations in which it produced 57,000 units and sold 52,000units.

Variable costs perunit:
Manufacturing:
Direct materials	$	25
Direct labor	$	18
Variable manufacturingoverhead	$	3
Variable selling andadministrative	$	5
Fixed costs per year:
Fixed manufacturingoverhead	$	627,000
Fixed selling and administrativeexpenses	$	645,000

The company sold 36,000 units in the East region and 16,000units in the West region. It determined that $310,000 of its fixedselling and administrative expenses is traceable to the Westregion, $260,000 is traceable to the East region, and the remaining$75,000 is a common fixed cost. The company will continue to incurthe total amount of its fixed manufacturing overhead costs as longas it continues to produce any amount of its only product.  

Question 1. Diego is considering eliminating the West regionbecause an internally generated report suggests the region’s totalgross margin in the first year of operations was $22,000 less thanits traceable fixed selling and administrative expenses. Diegobelieves that if it drops the West region, the East region's saleswill grow by 5% in Year 2. Using the contribution approach foranalyzing segment profitability and assuming all else remainsconstant in Year 2, what would be the profit impact of dropping theWest region in Year 2?

Question 2: Assume the West region invests $47,000 in a newadvertising campaign in Year 2 that increases its unit sales by20%. If all else remains constant, what would be the profit impactof pursuing the advertising campaign?