The segmented income statement for XYZ Company for the year ended December 31, 2019, follows: XYZ COMPANY Segmented Income Statement For the Year Ended December 31, 2019 Total Product Company Product A B Sales $625,000 $309,000 $130,000 Variable expenses 280,000 152,000 56,000 Contribution $345,000 $157,000 $ 74,000 margin Fixed expenses 274,000 163,000 43,000 Operating income $ 71,000 $ (6,000 $ 31,000 Product $186,000 72,000 $114,000 68,000 $ 46,000 The company is concerned about the performance of product A, and you have been asked to analyze the situation and recommend to the president whether to continue or discontinue the product. During your investigation, you discover that certain fixed expenses are traceable directly to each product line as indicated here: Total Company $104,000 Product Product Product A B $74,000 $11,000 $19,000 Direct fixed expenses The remaining fixed expenses are considered to be corporatewide expenses that have been allocated to each product line based on sales revenue. Required: a. What will be the effect of the decision to discontinue product A on operating income? b. Assume that product A is discontinued. Prepare a segmented income statement for the remaining products. Allocate corporatewide fixed expenses as described. c. Starting with the segmented income statement, use the information you discovered during your investigation to present a more appropriately designed segmented income statement. Complete this question by entering your answers in the tabs below. Required Required Required A B What will be the effect of the decision to ontinue product A on operating income? Operating income will $ decrease by for the XYZ Company if it (78,000) discontinues Product A. (Required A Required B > X Answer is not complete. Complete this question by entering your answers in the tabs below. Required Required Required A B Assume that product A is discontinued. Prepare a segmented income statement for the remaining products. Allocate corporatewide fixed expenses as described. (Round intermediate calculations to 2 decimal places.) Show less XYZ COMPANY Segmented Income Statement For the Year Ended December 31, 2019 Total Product Product C Company B Sales Variable expenses Contribution margin $ 0 $ 0 $ 0 Direct fixed expenses Common fixed expenses Operating $ 0 $ 0 $ 0 income/loss X Answer is not complete. Complete this question by entering your answers in the tabs below. Required Required Required A B Starting with the segmented income statement, use the information you discovered during your investigation to present a more appropriately designed segmented income statement. Product XYZ COMPANY Segmented Income Statement For the Year Ended December 31, 2019 Total Product Product Company A B Sales Variable expenses Contribution margin 0 0 0 Direct fixed expenses Segment margin 0 $ 0 $ 0 Common fixed expenses Operating $ 0 income/loss 0 $ 0
