Fanning Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated.

FANNING COMPANY
Income Statements for the Year 2018
Segment	A				B				C
Sales	$	163,000			$	252,000			$	252,000
Cost of goods sold		(124,000)				(85,000)				(79,000)
Sales commissions		(20,000)				(28,000)				(22,000)
Contribution margin		19,000				139,000				151,000
General fixed operating expenses (allocation of presidents salary)		(42,000)				(40,000)				(28,000)
Advertising expense (specific to individual divisions)		(5,000)				(20,000)				0
Net income	$	(28,000)			$	79,000			$	123,000

Required

1. Prepare a schedule of relevant sales and costs for Segment A.

2. Prepare comparative income statements for the company as a whole under two alternatives: (1) the retention of Segment A and (2) the elimination of Segment A.

Relevant Rev. and Cost items for Segment A Sales Advertising expense Cost of goods sold $ 667,000 Effect on income $667,000 FANNING COMPANY Comparative Income Statements for the Year 2018 Decisiorn Sales Cost of goods sold Sales commissions Contribution margin General fixed operating expenses Advertising expense Net Income Keep Seg. A Eliminate Seg. A 0