Segment reporting}

Western-Southern Publishing Company prepares income statements segmented by divisions, but the chief operating officer is not certain about how the company is actually performing. Financial data for the year follow:

{Required:}
1. Prepare an income statement segmented by products of the Electronic Division, including a column for the division as a whole. (Hint: To obtain the common fixed expenses, start with the total direct expenses in the Electronic Division.)
2. Prepare an income statement, segmented by markets, of the accounting books of the Electronic Division.
3. Evaluate the accounting books of the Electronic Division. Should all books be kept or should some books be discontinued?

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Sales Segments Textbook Electronic Division Division Total Company $360,000 $840,000 $1,200,000 Less variable expenses: Manufacturing $ 64,000 $422,000 $ 486,000 Selling and administrative 8,000 42,000 50,000 Total $ 72,000 $464,000 $ 536,000 Contribution margin $288,000 Less direct fixed expenses 30,000 $376,000 440,000 $ 664,000 470,000 Net income. $258,000 $ (64,000) $ 194,000 The Electronic Publishing Division appears to be floundering, and the CEO believes that a closer look should be taken concerning its operating effectiveness. Additional data regarding this division follow: Accounting Executive Management Sales $300,000 $280,000 $260,000 Variable manufacturing expenses as a percentage of sales 60% 40% 50% Other variable expenses as a percentage of sales 5% 5% 5% Direct fixed expenses $100,000 $150,000 $100,000 The Electronic Division's accounting books are downloadable texts sold to auditors and controllers. The current data on these two markets follow: