Question
Zachary Transport Company divides its operations into four divisions. A recent income statement for its West Division follows. ZACHARY TRANSPORT COMPANY West Division Income Statement
Zachary Transport Company divides its operations into four divisions. A recent income statement for its West Division follows.
| ZACHARY TRANSPORT COMPANY | |
|---|---|
| West Division | |
| Income Statement for Year 3 | |
| Revenue | $ 690,000 |
| Salaries for drivers | (540,000) |
| Fuel expenses | (69,000) |
| Insurance | (89,000) |
| Division-level facility-sustaining costs | (59,000) |
| Companywide facility-sustaining costs | (149,000) |
| Net loss | $ (216,000) |
Required
- By how much would companywide income increase or decrease if West Division is eliminated? Should West Division be eliminated?
- Assume that West Division is able to increase its revenue to $780,000 by raising its prices. Determine the amount of the contribution to profit by West Division. Should West Division be eliminated if revenue is $780,000?
- What is the minimum amount of revenue required to justify continuing the operation of West Division?
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Intermediate Accounting
Authors: J. David Spiceland, James Sepe, Mark Nelson
6th edition
978-0077328894, 71313974, 9780077395810, 77328892, 9780071313971, 77395816, 978-0077400163
