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Zachary Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated. ZACHARY COMPANY Income Statements
Zachary Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated.
ZACHARY COMPANY | |||
---|---|---|---|
Income Statements for Year 2 | |||
Segment | A | B | C |
Sales | $ 171,000 | $ 253,000 | $ 260,000 |
Cost of goods sold | (130,000) | (74,000) | (95,000) |
Sales commissions | (19,000) | (28,000) | (27,000) |
Contribution margin | 22,000 | 151,000 | 138,000 |
General fixed operating expenses (allocation of presidents salary) | (40,000) | (44,000) | (44,000) |
Advertising expense (specific to individual divisions) | (4,000) | (12,000) | 0 |
Net income (loss) | $ (22,000) | $ 95,000 | $ 94,000 |
Required
- Prepare a schedule of relevant sales and costs for Segment A.
- Prepare comparative income statements for the company as a whole under two alternatives: (1) the retention of Segment A and (2) the elimination of Segment A.
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