Tampermure Company has three product segments: Prefabrications, Castings, and Forging. Forging seems to be unprofitable and management is considering dropping the segment entirely.

Fixed Costs have been separated into Direct and Common. Direct Fixed Costs are correlated to the product line. Common Fixed Costs are facility level activities allocated as a percentage of total revenue.

Required:

Compute the allocation of Common Fixed Costs and Net Operating Income for each segment and the total.

Tampermure Company's management recommends that Forging be dropped immediately to increase profits. Show what happens to Tampermure Company's income statement if this happens.

Hint: Use the original data to fill and compute amounts.

Management believes that by dropping Forging, sales of Prefabrications and Casting will decrease. What will the income statement look like if this happens?

Hint: Use the original data to fill and compute amounts.

To prevent sales of Prefabrications and Casting from decreasing, management proposes launching a marketing campaign to increase the remaining segments' sales, but this will also increase common costs. What will the income statement look like if this happens?

Hint: Use the original data to fill and compute amounts.