Question
1When Rosana, CFO of Hydie Inc., first evaluated the segmented income statement below, he flew into his usual rage: When are we having losses in
1When Rosana, CFO of Hydie Inc., first evaluated the segmented income statement below, he flew into his usual rage: "When are we having losses in our product lines, I would rather eliminate them.
Product Lines
Total
U
V
W
Sales
$250,000
$100,000
$75,000
$75,000
Variable expenses
$119,000
$37,500
$35,000
$47,000
Contribution margin
$130,500
$62,500
$40,000
$28,000
Traceable fixed expenses*
$98,000
$31,000
$37,000
$30,000
Common expenses, allocated
$32,900
$18,000
$10,500
$4,400
Operating income (loss)
-$400
$13,500
$(7,500)
$(6,400)
*These traceable expenses could be eliminated if the product lines to which they are traced were discontinued. Required: Recommend which segments, if any, should be eliminated. Prepare a report in good form to support your answer. Show all the necessary calculations.
1When Rosana, CFO of Hydie Inc., first evaluated the segmented income statement below, he flew into his usual rage: "When are we having losses in our product lines, I would rather eliminate them.
| Product Lines | |||
| Total | U | V | W |
Sales | $250,000 | $100,000 | $75,000 | $75,000 |
Variable expenses | $119,000 | $37,500 | $35,000 | $47,000 |
Contribution margin | $130,500 | $62,500 | $40,000 | $28,000 |
Traceable fixed expenses* | $98,000 | $31,000 | $37,000 | $30,000 |
Common expenses, allocated | $32,900 | $18,000 | $10,500 | $4,400 |
Operating income (loss) | -$400 | $13,500 | $(7,500) | $(6,400) |
*These traceable expenses could be eliminated if the product lines to which they are traced were discontinued. Required: Recommend which segments, if any, should be eliminated. Prepare a report in good form to support your answer. Show all the necessary calculations.
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