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Edward Lewis was reviewing the latest income statement for Sunland Communications. For the second year in a row, the Audio division was showing a negative
Edward Lewis was reviewing the latest income statement for Sunland Communications. For the second year in a row, the Audio division was showing a negative segment margin, and Edward thought it was time to close the division to increase the company's operating income. The income statement that he examined follows. When Edward broke the news, Ruth Lee, manager of the Audio division, was upset. Ruth thought that Edward could be making a decision too quickly, and suggested that he look at the division's detailed operating results. The Audio division is composed of two groups, Streaming and CD. Streaming accounts for 75% of the division's sales and contribution margin; CD accounts for the other 25\%. Streaming's traceable fixed costs are $451,900;CD,$351,900. Prepare a segment margin income statement for the Audio division that shows the segment margin of each group. (If the amount is negative then enter with a negative sign preceding the number, e.g. 5,125 or parenthesis, e.g. (5,125) and round answers to 0 decimal places, e.g. 5,125.) Should Edward Lewis close the Audio Division? Jim should consider closing
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