Claire Jackson (CEO) of Easy Learning (EL) is considering discontinuing operations in South America, which are based in Argentina. For a variety of reasons it has been a challenge for EL to grow the busi- ness in this region and costs continue to rise because of high inflation. Results from the most recent fiscal year just ended are shown below.

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $400,000

Variable expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,000

Contribution margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $220,000

Fixed expenses ……………………………

310,000

Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . .

. . . ($90,000)

If the South American operations are discontinued, Jackson has identified the following implications:

Jackson is also considering the option of trying to make the South American operations profitable. She believes that with more emphasis on marketing and sales, EL could be successful. Details and assumptions made by Jackson for this option are as follows:

Required:

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