LO 13-4 Exercise 13-14 Segment elimination decision Patterson Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated. Segment Sales Cost of goods sold Sales commissions PATTERSON COMPANY Income Statements for the Year 2014 Contribution margin General fixed oper. exp. (allocation of president's salary) Advertising expense (specific to individual divisions) Net income A $165,000 (121,000) (15,000) 29,000 (44,000) (3,000) $ (18,000) 13 B $240,000 (92,000) (22,000) C $250,000 (95,000) (22,000) 133,000 (44,000) 126,000 (52,000) (10,000) $ 64,000 $ 89,000 Required a. Explain the effect on profitability if Segment A is eliminated. b. 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.

Exercise 13-14 Segment elimination decision Patterson Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated. Required a. Explain the effect on profitability if Segment is eliminated. b. 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