Question
Solomon Transport Company divides its operations into four divisions. A recent income statement for its West Division follows. SOLOMON TRANSPORT COMPANY West Division Income Statement
Solomon Transport Company divides its operations into four divisions. A recent income statement for its West Division follows.
| SOLOMON TRANSPORT COMPANY | |
| West Division | |
| Income Statement for Year 3 | |
| Revenue | $ 640,000 |
|---|---|
| Salaries for drivers | (490,000) |
| Fuel expenses | (64,000) |
| Insurance | (84,000) |
| Division-level facility-sustaining costs | (54,000) |
| Companywide facility-sustaining costs | (144,000) |
| Net loss | $ (196,000) |
Required
A) By how much would companywide income increase or decrease if West Division is eliminated? Should West Division be eliminated?
B) Assume that West Division is able to increase its revenue to $720,000 by raising its prices. Determine the amount of the contribution to profit by West Division. Should West Division be eliminated if revenue is $720,000?
C) What is the minimum amount of revenue required to justify continuing the operation of West Division?
| Income Would | by | ||
| Should West Division be eliminated |
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Essentials Of Accounting For Governmental And Not For Profit Organizations
Authors: John Engstrom, Paul Copley
6th Edition
0072411724, 9780072411720
