Rockwell Company owns a single restaurant which has a cantina primarily used to
ID: 2376694 • Letter: R
Question
Rockwell Company owns a single restaurant which has a cantina primarily used to seat patrons while they wait on their tables. The company is considering eliminating the cantina and adding more dining tables. Segmented contribution income statements are as follows and fixed costs applicable to both segments are allocated on the basis of sales.
Restaurant
Cantina
Total
Sales
$800,000
$200,000
$1,000,000
Variable costs
475,000
160,000
635,000
Direct fixed costs
50,000
15,000
65,000
Allocated fixed costs
212,500
37,500
250,000
Net Income
$ 62,500
($12,500)
$50,000
What financial effect will occur to profit if Rockwell eliminates the cantina but no more dining customers are served?
PLEASE SHOW WORK..THANKS!
Restaurant
Cantina
Total
Sales
$800,000
$200,000
$1,000,000
Variable costs
475,000
160,000
635,000
Direct fixed costs
50,000
15,000
65,000
Allocated fixed costs
212,500
37,500
250,000
Net Income
$ 62,500
($12,500)
$50,000
Explanation / Answer
answer =12500 -correct answer
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