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ElecMech Company has two divisions Electrical and Mechanical. The company's overall sales are $300,000 for the year ended July 31, 2021. The Electrical Division has
ElecMech Company has two divisions Electrical and Mechanical. The company's overall sales are $300,000 for the year ended July 31, 2021. The Electrical Division has sales of $200.000 and a contribution margin ratio of 40%. The Mechanical Division has a variable expense ratio of 75% and fixed expenses of $30.000 (these expenses would discontinue if the Mechanical Division is dropped). Total fixed expenses are $80,000, of this amount $15,000 is unavoidable regardless of which divisions are kept or dropped Required: 1. Prepare a segmented income statement in good form (9 marks) 2. Why is a segmented income statement useful if the company is considering dropping a segment? (1 mark)
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