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Jordan Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated. JORDAN COMPANY Income Statements
Jordan Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated.
JORDAN COMPANY | |||
---|---|---|---|
Income Statements for Year 2 | |||
Segment | A | B | C |
Sales | $ 167,000 | $ 253,000 | $ 253,000 |
Cost of goods sold | (124,000) | (82,000) | (92,000) |
Sales commissions | (21,000) | (30,000) | (29,000) |
Contribution margin | 22,000 | 141,000 | 132,000 |
General fixed operating expenses (allocation of presidents salary) | (43,000) | (51,000) | (31,000) |
Advertising expense (specific to individual divisions) | (4,000) | (16,000) | 0 |
Net income (loss) | $ (25,000) | $ 74,000 | $ 101,000 |
Required
- Prepare a schedule of relevant sales and costs for Segment A.
- 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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