E7-12 (Algo) Analyzing Keep-or-Drop Decision (LO 7-2, 7-5) Anderson Publishing has two divisions Book Publishing & Magazine Publishing. The Magazine division has been losing money for the last 5 years and Anderson is considering eliminating that division. Anderson's information about the two divisions is as follows Sales Revenue Cost of Goods sold Variable costs Fixed costs Gross Profit Operating Expenses Variable Fixed Net Income Book Division $ 8,060,000 2,260,000 1,103,500 $ 4.696,500 Magasine Division $ 3,410,000 1,126,600 1.262,000 $ 1,016,400 Total $11, 420,000 3,386,600 2,370,500 $ 5,212,900 161,000 2.942,000 $ 1.593,500 236,100 1,203,500 S (423,200) 397.100 4,145,500 $ 1,170,300 25 Only 20 percent of the fixed manufacturing costs and 60 percent of the fixed operating expenses are directly attribute to each division. The remainder are common or shared between the two divisions. Required: 1. Present the financial information in the form of a segmented income statement (using the contribution margin approach). 2. What will be the impact on net income if the Magazine Division is eliminated? Required 1 Required 2 Present the financial information in the form of a segmented income statement (using the contribution margin approach). Book Division Magazino Division Total Variable costs Direct fixed costs Common fixed costs Net income (loss) Required 1 Required 2 What will be the impact on net income if the Magazine Division is eliminated? Impact on net income