1) Sedano’s Supermarket has prepared the following segmented income statement fo

Question

1) Sedano’s Supermarket has prepared the following segmented income statement for three of its departments in it’s flagship store in late 2006. Agustin Herrán is contemplating dropping the magazines and selling (not eliminating) the pharmacy business to Navarro Discount Pharmacies. He sees that those two departments are losing money and the bread department is only marginally profitable and may be able to do better if he could expand the space into the space now occupied by the magazine dept. Corporate costs are allocated equally among all departments

.1. Prepare a more useful and understandable segmented income statement for Sr. Herrán.

1.2. Based on your segmented income statement, should Sr. Herrán drop the magazine department? Why or why not?

1.3. Based on your segmented income statement, should Sr. Herrán sell the pharmacy? Why or why not?

Bread Magazines Pharmacy Total Sales $350,000 $120,000 $350,000 $820,000 Variable expenses 220,000 95,000 290,000 605,000 Contribution margin 130,000 25,000 60,000 215,000 Other costs 60,000 10,000 65,000 135,000 Segment margin 70,000 15,000 -5,000 80,000 Allocated avoidable costs 18,000 10,000 20,000 48,000 Segment income 52,000 5,000 -25,000 32,000 Allocated corporate costs 50,000 50,000 50,000 150,000 Corporate profit $2,000 ($45,000) ($75,000) ($118,000)

Explanation / Answer

Soluton:

(1).

Segment Income Statement

(2). Caluculation of Segment Income Statement Except the Magazines:

Segment Income Statement Except the Magazines

(3). Caluculation of Segment Income Statement Except Pharmacy:

     Segment Income Statement Except Pharmacy

Particulars Breads Magazines Pharamacy Total Sales 3,50,000 1,20,000 3,50,000 8,20,000 Less: Variable Expencess 2,20,000 95,000 2,90,000 6,05,000 Contribution Margin 1,30,000 25,000 60,000 2,15,000 Less: Other Costs 60,000 10,000 65,000 1,35,000 Segment Margin 70,000 15,000 (5000) 80,000 Less: Allocated Aviodable Costs 18,000 10,000 20,0000 48,000 Segment Income 52,000 5,000 (25,000) 32,000

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.