Elimination of an Unprofitable Segment Decision

4. The Mason Corporation makes three different types of wheelchairs. The results of the wheelchair sales by model are summarized below:

		Sport	Travel	Home
		Model	Model	Model		Total
Sales		160,000	240,000	160,000		560,000
Variable Costs		-50,000	-126,000	-44,000		-220,000
Fixed Costs Avoidable		-54,000	-70,000	-52,000		-176,000
Fixed Cost Allocated		-10,000	-60,000	-20,000		-90,000
Income or Loss		46,000	-16,000	44,000		72,000

If the Travel Model is eliminated, then the $30,000 of the allocated fixed costs would have to be allocated to other remaining divisions.

If the Travel Model were discontinued, how would this change?
		Sport	Travel	Home
		Model	Model	Model		Total
Sales		160,000	240,000	160,000		560,000
Variable Costs		-50,000	-126,000	-44,000		-220,000
Fixed Costs Avoidable		-54,000	-70,000	-52,000		-176,000
Fixed Cost Allocated		-10,000	-60,000	-20,000		-90,000
Income or Loss		46,000	-16,000	44,000		72,000

A. Should the Travel Model line of wheelchairs be eliminated? Yes No

B. How much additional income will be realized by eliminating the home model?

(Show your calculations.)