10.5 (LO 2) Segment margin income statement Magellan & Columbus, Ltd. manufactures boats and personal watercraft. The company operates three separate divisions: yachts, sailboats, and jet skis. The company's latest income statement is presented by product line as follows:

Yachts Sailboats Jet Skis Total

Sales revenue $50,000,000 $24,000,000 $6,000,000 $80,000,000

Variable cost of goods sold 25,000,000 14,000,000 4,200,000 43,200,000

Fixed cost of goods sold 9,000,000 4,600,000 700,000 14,300,000

Gross profit 16,000,000 5,400,000 1,100,000 22,500,000

Variable operating expenses 7,500,000 1,500,000 627,000 9,627,000

Fixed operating expenses 3,600,000 1,000,000 300,000 4,900,000

Allocated corporate costs 3,750,000 1,800,000 450,000 6,000,000

Operating income $1,150,000 $1,100,000 $(277,000) $1,973,000

Required

Prepare a segment margin income statement showing each of the three divisions. Fixed cost of goods sold and fixed operating expenses can be traced to each product line. Chris Columbus, CEO, is concerned about the Jet Ski division's operating loss; he wants to close the division to save money. Do you support his decision? Why or why not?