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Problem 2 (10 points). Rambutan Computer Store sells computers and related products. In addition, it sells copy machines and supplies. The company has the following
Problem 2 (10 points). Rambutan Computer Store sells computers and related products. In addition, it sells copy machines and supplies. The company has the following information available concerning each segment of the business. RAMBUTAN COMPUTER STORE SEGMENT ANALYSIS OF OPERATIONS Computers Copiers $ 600,000 $ 150,000 Total Sales Revenue $ 750,000 Expenses: Variable 280,000 75,000 355,000 Fixed--Salaries 60,000 20,000 80,000 Fixed--Others 175,000 65,000 240,000 Total Expenses 515,000 160,000 675,000 Operating Profit (Loss) $ 85,000 $ 10,000 $ 75,000 The store manager wants to discontinue the copier segment since it has consistently shown an operating loss. If the segment is discontinued, only the fixed salaries would be eliminated and the current store space occupied by the copier segment could not be used for any other business venture that would generate revenue. Currently, the other fixed expenses consist of costs that are allocated to each segment based upon store space occupied. REQUIRED: (1) Should the company discontinue the copier segment? Provide an analysis to support your answer. Calculate the operating profit or loss for the company if the copier segment is discontinued. (2)
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