Question

Marinette Company makes several products, including cances. The company has been experiencing losses from its cance segment and is considering dropping that product line. The following information is available regarding its cance segment (Leave no cells blank. Enter zeros where appropriate.) $2,600,000 MARINETTE COMPANY Income Statement-Canne Segment Sales Variable costs Direct materials $ 570,000 Direct labor 620, BOD Variable overhead 420,000 Variable selling and administrative 260,000 Total variable costs Contribution margin Fixed costs 495.000 Indirect 420,000 Total fixed costs Net income 1,870,000 730,000 915,000 (185,000 S 1. If canoes are discontinued, calculate the net income lost or gained. Keep the Eliminate the

Answer 1

1
	Keep the Department	Eliminate the Department
Sales	2600000	0
Expenses:
Direct materials	570000	0
Direct labor	620000	0
Variable overhead	420000	0
Variable selling and administrative	260000	0
Direct Fixed costs	495000	0
Indirect Fixed costs	420000	420000
Total expenses	2785000	420000
Net income(loss)	-185000	-420000
The Canoe division should be	kept
If the Canoe division is eliminated, income will be	lower by	235000
2
No, management should not discontinue the manufacturing of Canoes