ment-take&inprogress-false-; Ceng C NME eBook Calculator Print tem Petoskey Comp
ID: 2579393 • Letter: M
Question
ment-take&inprogress-false-; Ceng C NME eBook Calculator Print tem Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given follows: Sales revenue Less: Variable expenses Contribution margin Less direct fixed expenses: Alanson Boyne Conway Total 1,280 $185 $330 $1,795 248 1408 387 1,115 165 $140 $82 o 15 85 $20 $40 ) Direct fixed expenses consist of depreation and plant 76 280 $31 95 100 Segment margin $(29) supervisory salaries. All depreciation on the equipment is dedicated to the product lines. Non of the equipment can be sold Assume that, each of the three products has a different supervisor Assume that 20% of the Alanson customers choose to buy horn Petoskey because t were no langer available from Petoskey, these oustomers would go elsewhere to purchase Alanson whose position would be eliminated it the associated product were dropped. offers a full range of products, inaidng Conway. If Conway Estimate the impect on profit that would result from drooping Conway. Enter amount in full, rather than in thousands. For Conceptual Connection: example, "15000 rather than "15 Decrease 1000x o more Check My Work uses remaining Previous Next All work saved save and E. ubmit t for GradinExplanation / Answer
Note : Depreciation expense shall not be revelant for decision making in the given case as it is a sunk cost.
Therefore , total cost saving if Conway is drop = Superviion salay of Conway division = $100,000
total contribution lost if Conway is drop = Contribution of Conway + 20% contribution of Alanson
= $82,000 + ( $165,000 * 20 %) = $115,000
Impact in profit from dropping Conway : total cost saving - total contribution lost
= $100,000 - $115,000 = ($15,000)
Final Answer : Decrease $15000
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