Question
Question 12 (11 points) Polar Company has two divisions, Northern and Southern. The company's overall sales are $350,000 for the year ended July 31,
Question 12 (11 points) Polar Company has two divisions, Northern and Southern. The company's overall sales are $350,000 for the year ended July 31, 2022. Information for the Northern Division: - Sales of $100,000 - Contribution margin ratio of 40% Information for the Southern Division: - Variable expense ratio of 75% - Fixed expenses of $30,000 (these expenses would discontinue if the Southern Division is dropped). Other information Total fixed expenses for the company are $85,000, of this amount, $5,000 is unavoidable regardless of which divisions are kept or dropped. Required: 1. Prepare a segmented income statement in good form (7 marks) 2. Calculate the operating leverage for the company (2 marks) 3. Should the company drop either Division? Use calculations to support your answer (2 marks)
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