Question
Finch Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated. FINCH COMPANY Income Statements
Finch Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated.
| FINCH COMPANY | |||||||||||
| Income Statements for the Year 2018 | |||||||||||
| Segment | A | B | C | ||||||||
| Sales | $ | 169,000 | $ | 249,000 | $ | 247,000 | |||||
| Cost of goods sold | (122,000 | ) | (76,000 | ) | (94,000 | ) | |||||
| Sales commissions | (16,000 | ) | (30,000 | ) | (29,000 | ) | |||||
| Contribution margin | 31,000 | 143,000 | 124,000 | ||||||||
| General fixed operating expenses (allocation of presidents salary) | (39,000 | ) | (40,000 | ) | (30,000 | ) | |||||
| Advertising expense (specific to individual divisions) | (5,000 | ) | (16,000 | ) | 0 | ||||||
| Net income | $ | (13,000 | ) | $ | 87,000 | $ | 94,000 | ||||
Required
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Prepare a schedule of relevant sales and costs for Segment A.
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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.
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Managing The Audit Function A Corporate Audit Department Procedures Guide
Authors: Michael P. Cangemi, Tommie W. Singleton
3rd Edition
0471281190, 978-0471281191
