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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

  1. Prepare a schedule of relevant sales and costs for Segment A.
  2. 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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