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: Book Division $ 7,820,000 Magazine Division $ 3,308,500 Total $11,128,500 Sales Revenue Coat of Goods sold Variable costs Fixed costs Cross Profit Operating Expenses Variable Fixed Net Income 2,020,000 1,079,500 $ 4,720,500 1,007,000 3,027,000 1,205,200 2,284,700 1,096,300 5,816,800 200,900 337,900 1,190, 100 4,108,100 (294,700) $ 1,370,000 137,000 2,918,000 $ 1,665,500 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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Present the financial information in the form of a segmented income statement (using the contribution margin approach). Magazine Book Division Total Division Sales revenue S 7,820,000 $ 3,308,500 $ 11,128,500 Variable costs Cost of goods sold 2,020,000 1,007,000 3,027,000 Operating expenses 137.000 200,900 337,000 2,157,000 1,207,900 3,364,900 Contribution margin 5,663,000 2,100,600 7.763,800 Direct fixed costs Manufacturing costs Common fixed costs Net income foss) Complete this question by entering your answers in the tabs below. Required 1 Required 2 What will be the impact on net income if the Magazine Division is eliminated? Impact on net income