The segmented income statement for XYZ Company for the year ended December 31, 2016, follows:

XYZ COMPANY
Segmented Income Statement
For the Year Ended December 31, 2016
	Total Company				Product A				Product B				Product C
Sales	$	586,000			$	296,000			$	118,000			$	172,000
Variable expenses		281,000				147,000				58,000				76,000
Contribution margin	$	305,000			$	149,000			$	60,000			$	96,000
Fixed expenses		285,000				166,000				47,000				72,000
Operating income	$	20,000			$	(17,000	)		$	13,000			$	24,000

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	Product A	Product B	Product C
Direct fixed expenses	$100,000	$73,000	$11,000	$16,000

The remaining fixed expenses are considered to be corporate-wide expenses that have been allocated to each product line based on sales revenue.

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 corporate-wide fixed expenses as described. (Round intermediate calculations to 2 decimal places.)

c. Starting with the segmented income statement, use the information you discovered during your investigation to present a more appropriately designed segmented income statement.

for the XYZ Company if it discontinues Product Operating income will by