Keep-or-Drop Decision
Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows:
Alanson | Boyne | Conway | Total | ||||
Sales revenue | $1,280 | $185 | $300 | $1,765 | |||
Less: Variable expenses | 1,115 | 45 | 225 | 1,385 | |||
Contribution margin | $ 165 | $140 | $ 75 | $ 380 | |||
Less direct fixed expenses: | |||||||
Depreciation | 50 | 15 | 10 | 75 | |||
Salaries | 95 | 85 | 80 | 260 | |||
Segment margin | $ 20 | $ 40 | $ (15) | $ 45 |
Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on the equipment is dedicated to the product lines. None of the equipment can be sold.
Assume that each of the three products has a different supervisor whose position would be eliminated if the associated product were dropped.
Required:
Conceptual Connection:
Estimate the impact on profit that would result from dropping
Conway. Enter amount in full, rather than in thousands. For
example, "15000" rather than "15".
Increase $______
Solution:
Impact on profit from dropping conway = Saving in fixed costs - contribution margin lost = $80,000 - $75,000 = $5,000 increase in profit.
Keep-or-Drop Decision Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with...
EXAMPLE ONE - Keep-or-Drop Decision Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows: Alanson Boyne Conway Total Sales revenue $1,280 $185 $300 $1,765 Less: Variable expenses 1,115 45 210 1,370 Contribution margin $165 $140 $90 $395 Less direct fixed expenses: Depreciation 50 15 10 75 Salaries 95 85 108 288 Segment margin $20 $40 $(28) $32 Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on...
Keep-or-Drop Decision Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows Sales revenue Less: Variable expenses Contribution margin Less direct fixed expenses Alanson Boyne Conway Total $40 $1,915 1,520 $395 $1,280 $185 45 $165 $140 1,115 360 $90 50 95 $20 15 85 $40 10 120 $(40) 75 300 $20 Depreciation Salaries Segment margin Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on the equipment is...
Keep-or-Drop Decision Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented Income statement, with amounts given in thousands, follows: Alanson Boyne Conway Total Sales revenue $1,280 $185 $330 $1,795 Less: Variable expenses 1,115 45 Contribution margin $165 $140 Less direct fixed expenses: Depreciation Salaries 95 85 Segment margin $20 $40 $20 540 $(42) $18 Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on the equipment is dedicated to the product lines. None of the...
Keep-or-Drop Decision Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows: Alanson Boyne Conway Total Sales revenue $1,280 $185 $270 $1,735 Less: Variable expenses 1,115 45 189 1,349 Contribution margin $165 $140 $81 $386 Less direct fixed expenses: Depreciation 50 15 15 80 Salaries 95 85 116 296 Segment margin $20 $40 $(50) $10 Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on the equipment is...
Keep-or-Drop Decision Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows: Alanson Boyne Conway Total Sales revenue $1,280 1,115 $185 45 $270 203 $1,735 1,363 Less: Variable expenses Contribution margin $165 $140 $372 Less direct fixed expenses: Depreciation 15 14 79 Salaries 95 85 120 300 Segment margin $20 $40 $(67) Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on the equipment is dedicated to the...
eBook Calculator Keep-or-Drop Decision Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows: Alanson Boyne Conway Total Sales revenue $1,280 1,115 $185 45 $285 185 $1,750 1,345 Less: Variable expenses Contribution margin $165 $140 $100 $405 Less direct fixed expenses: Depreciation 50 95 15 85 15 108 $(23) 80 288 Salaries Segment margin $20 $40 $37 Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on the...
Keep-or-Drop Decision Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows: Alanson Boyne Conway Total Sales revenue $360 $1,825 Less: Variable expenses $1,280 1,115 $165 $185 45 $140 270 1,430 Contribution margin $395 Less direct fixed expenses: Depreciation 15 80 15 100 95 Salaries 85 280 20 $40 $(25) Segment margin $35 Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on the equipment is dedicated to...
Keep-or-Drop Decision Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows: Alanson Boyne Conway Total Sales revenue $1,825 $1,280 $185 1,11545 $360 270 Less: Variable expenses 1,430 Contribution margin $165 $140 $90 $395 Less direct fixed expenses: Depreciation 15 12 104 104 Salaries 95 85 284 Segment margin $20 $40 $(26) $34 Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on the equipment is dedicated to...
TO H UWUR HD With Chege Study I Cheg.. + eBook Calculator Keep-or-Drop Decision Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows: Alanson Boyne Conway Total Sales revenue $1,280 $185 $270 $1,735 Less: Variable expenses 1,376 1,115 $165 45 $140 216 $54 Contribution margin $359 Less direct fixed expenses: Depreciation - 50 95 15 85 10 112 $(68) 75 292 Salaries Segment margin $20 $40 Direct fixed expenses contist...
Alanson Sales revenue Boyne Conway Total $1,280 Less: Variable expenses $185 $345 $1,810 1,115 45 276 1,436 $165 $140 Contribution margin Less direct fixed expenses: Depreciation $69 $374 50 15 14 Salaries 79 95 85 100 280 Segment margin $20 $40 $(45) $15 Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on the equipment is dedicated to the product lines. None of the equipment can be sold. < Assume that each of the three products has...