Sheridan Equipment sells equipment to sports enthusiasts. Doug Sheridan, the company's president, just received the following income statement reporting the results of the past year.

Baseball Soccer Basketball Total

Sales revenue $1,310,000 $3,750,000 $2,465,000 $7,525,000

Variable cost of goods sold 884,000 2,437,000 1,985,600 5,307,100

Fixed cost of goods sold 119,300 194,700 171,500 485,500

Gross profit 306,700 1,117,800 307,900 1,732,400

Variable operating expenses 176,800 600,000 246,500 1,023,300

Fixed operating expenses 82,200 87,500 75,900 245,600

Common fixed costs 62,500 134,000 100,900 297,400

Operating income ($14,800) $296,300 ($115,400) $166,100

Doug is concerned that two of the company's divisions are showing a loss, and he wonders if the company should stop selling baseball and basketball gear to concentrate solely on soccer gear.

Sumbit a segment margin income statement. Fixed cost of goods sold and fixed operating expenses can be traced to each division. (If the amount is negative then enter with a negative sign preceding the number, e.g. -5,125 or parenthesis, e.g. (5,125).)

Baseball Soccer Basketball Total

Should Doug close the baseball and basketball divisions?

Doug wants to change the allocation method used to allocate common fixed costs to the divisions. His plan is to allocate these costs based on sales revenue. Will this new allocation method change your decision on whether to close the baseball and basketball divisions?

Changing allocation methods