Exercise 23-13 Income analysis of eliminating Departments LO A1

Marinette Company makes several products, including canoes. The company has been experiencing losses from its canoe segment and is considering dropping that product line. The following information is available regarding its canoe segment. (Leave no cells blank. Enter zeros where appropriate.)

1. If canoes are discontinued, calculate the net income lost or gained.

MARINETTE COMPANY Income StatementCanoe Segment
Sales				$	2,700,000
Variable costs
Direct materials	$	590,000
Direct labor		640,000
Variable overhead		440,000
Variable selling and administrative		270,000
Total variable costs					1,940,000
Contribution margin					760,000
Fixed costs
Direct		515,000
Indirect		440,000
Total fixed costs					955,000
Net income				$	(195,000	)

2. Should management discontinue the manufacturing of canoes? Yes/No

$2,700,000 MARINETTE COMPANY Income Statement-Canoe Segment Sales Variable costs Direct materials $ 590,000 Direct labor 640,000 Variable overhead 440,000 Variable selling and administrative 270,000 Total variable costs Contribution margin Fixed costs Direct 515,000 Indirect 440,000 Total fixed costs Net income 1,940,000 760,000 955,000 $ (195,000)