Answer:
Operating income for the Smith's corporation as a whole if the Jackson's division were dropped is $22,500
Explanation:
The operations of Smith's Corporation are divided into the Child Division and the Jackson Division. Projections for the next year are as follows:
                                      Child  Division   Jackson  Division     Total
Sales revenue                 $250,000           $180,000      $430,000
Variable expenses              90,000              100,000         190,000
Contribution margin         $160,000             $80,000      $240,000
Direct fixed expenses          75,000               62,500          137,500
Segment margin                 $85,000             $17,500        $102,500
Allocated common costs      35,000               27,500           62,500
Total relevant benefit         $50,000            $(10,000)         $40,000
Operating income for the Smith's corporation as a whole if the Jackson's division were dropped
                                      Child  Division    
Sales revenue                 $250,000        
Variable expenses              90,000              
Contribution margin         $160,000             
Direct fixed expenses          75,000               
Segment margin                 $85,000              
Allocated common costs      62,500                
Total relevant benefit         $22,500            
Note that common fixed costs will be borne by the child division alone when the Jackson division is closed which is the entire 62,500 is deducted from the sales margin of child division before arriving at profit