Question

Anderson Publishing has two divisions: Book Publishing & Magazine Publishing. The Magazine division has been losing money for the last 5 years and Anderson is considering eliminating that division. Anderson’s information about the two divisions is as follows:

	Book Division				Magazine Division				Total
Sales Revenue	$	7,900,000			$	3,342,300			$	11,242,300
Cost of Goods sold
Variable costs		2,100,000				1,046,900				3,146,900
Fixed costs		1,087,500				1,225,800				2,313,300
Gross Profit	$	4,712,500			$	1,069,600			$	5,782,100
Operating Expenses
Variable		145,000				212,700				357,700
Fixed		2,926,000				1,194,600				4,120,600
Net income	$	1,641,500			$	(337,700	)		$	1,303,800

Only 20 percent of the fixed manufacturing costs and 60 percent of the fixed operating expenses are directly attribute to each division. The remainder are common or shared between the two divisions.

Required:

1. Present the financial information in the form of a segmented income statement (using the contribution margin approach).

2. What will be the impact on net income if the Magazine Division is eliminated?

Only 20 percent of the fixed manufacturing costs and 60 percent of the fixed operating expenses are directly attribute to each division. The remainder are common or shared between the two divisions. Required: 1. Present the financial information in the form of a segmented income statement (using the contribution margin approach). 2. What will be the impact on net income if the Magazine Division is eliminated? Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Present the financial information in the form of a segmented income statement (using the contribution margin approach). Total Magazine Book Division Division $ 7,900,000$ 3,342,300 Sales revenue $ 11,242,300 Variable costs Cost of goods sold Operating expenses ✓ 2,100,000 145,000 1,046,900 212,700 3,146,900 357,700 5,655,000 2,082,700 7,737,700 Contribution margin Direct fixed costs Cost of goods sold Operating expenses X 1,087,500 X 2.926,000 X 1,225,800 X 1,194,600 2,313,300 4,120,600 X ✓ 1,641,500 X (337,700) 1,303,800 X Segment margin Common fixed costs < Prex 4 of 8 HH Next >

Answer 1

			book	Magazine	Total
			Division	Division
	Sales revenue		7,900,000	3,342,300	11,242,300
	Variable costs
	Cost of goods sold		2,100,000	1,046,900	3,146,900
	operating expenses		145,000	212,700	357,700
	total variable cost		2,245,000	1,259,600	3,504,600
	Contribution margin		5,655,000	2,082,700	7,737,700
	Direct fixed costs
	Cost of goods sold		217500	245160	462,660
	operating expenses		1755600	716760	2,472,360
	total direct fixed cost		1973100	961920	2,935,020
	Segment margin		3,681,900	1,120,780	4,802,680
	Common fixed cost
	manufacturing costs				1,850,640
	operating expenses				1648240
	total common fixed cost				3,498,880
	net income(loss)				1,303,800
	impact on net income			decrease by	1,120,780