Question

Exercise 23-13 Income analysis of eliminating Departments LO A1 Marinette Company makes several products, including canoes. The company has been experiencing losses from its canoe segment and is considering dropping that product line. The following information is available regarding its canoe segment. (Leave no cells blank. Enter zeros where appropriate.) points $3,600,000 eBook MARINETTE COMPANY Income Statement-Canoe Segment sales Variable costs Direct materials $ 770,000 Direct labor 820,000 Variable overhead 620.000 Variable selling and administrative 360,000 Total variable costs Contribution margin Pixed costs Direct 695,000 Indirect 620,000 Total fixed costs Net income 2,570,000 1,030,000 1,315,000 $ (285,000)

Answer 1

solution : keep the department 3600 000 Elemnated the Department sales Expenses. Direct materials 77000 Direct labor 820000 rasiable Neshead 620000 rasable sa A capenses 360ooo Direct fixed costs 695000 Indirect fined costs 620000 690000 Total expenses 3885000 620000 Net income (loss) (285000) (620 00D) The canoe department should be kept (as it results net loss if eliminated) If cance department is eliminated, income will be - lover by (620000 - 285000) $335000. 2) No, management should not discountinue" the manufacturing of canoes because it would suffer loss of $335000 if discontinued.