Question
Rock Incorporated has three divisions, Granite, Lime and Nina. All fixed costs are common and unavoidable. Following is the income statement for the previous year:
Rock Incorporated has three divisions, Granite, Lime and Nina. All fixed costs are common and unavoidable. Following is the income statement for the previous year:
| Granite | Lime | Nina | Total | |
|---|---|---|---|---|
| Sales revenue | $ 500,000 | $ 275,000 | $ 225,000 | $ 1,000,000 |
| Variable costs | 175,000 | 125,000 | 100,000 | 400,000 |
| Contribution/segment margin | $ 325,000 | $ 150,000 | $ 125,000 | $ 600,000 |
| Common fixed costs (allocated) | 275,000 | 151,250 | 123,750 | 550,000 |
| Net operating income (loss) | $ 50,000 | $ (1,250) | $ 1,250 | $ 50,000 |
Required:
- What would Rock's income (loss) be if the Lime Division were dropped?
- What would Rock's income (loss) be if the Nina Division were dropped?
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Intermediate Accounting
Authors: Donald E. Kieso, Jerry J. Weygandt, And Terry D. Warfield
13th Edition
9780470374948, 470423684, 470374942, 978-0470423684
