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 | $ | 8,200,000 | $ | 3,469,200 | $ | 11,669,200 | |||||
| Cost of Goods sold | |||||||||||
| Variable costs | 2,400,000 | 1,196,400 | 3,596,400 | ||||||||
| Fixed costs | 1,117,500 | 1,303,000 | 2,420,500 | ||||||||
| Gross Profit | $ | 4,682,500 | $ | 969,800 | $ | 5,652,300 | |||||
| Operating Expenses | |||||||||||
| Variable | 175,000 | 256,700 | 431,700 | ||||||||
| Fixed | 2,956,000 | 1,211,400 | 4,167,400 | ||||||||
| Net income | $ | 1,551,500 | $ | (498,300 | ) | $ | 1,053,200 | ||||
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?
Homework Answers
| Segmented Income Statement | |||
| Book | Magazine | Total | |
| Sales Revenue | 8,200,000 | 3,469,200 | 11,669,200 |
| Variable costs | |||
| Cost of goods sold | 2,400,000 | 1,196,400 | 3,596,400 |
| Operating Expenses | 175,000 | 256,700 | 431,700 |
| Total Variable costs | 2,575,000 | 1,453,100 | 4,028,100 |
| Contribution Margin | 5,625,000 | 2,016,100 | 7,641,100 |
| Direct Fixed costs | |||
| Directly Attributable | 1,997,100 | 987,440 | 2,984,540 |
| Segment Margin | 3,627,900 | 1,028,660 | 4,656,560 |
| Less: Common Fixed costs (1,936,400+1,666,960) | 3,603,360 | ||
| Net Income | 1,053,200 | ||
| Net Income will reduce by $1,028,660 i.e. segment margin |
| Book | Magazine | Total | |
| Fixed manufacturing costs (20%) | 223,500 | 260,600 | 484,100 |
| Fixed operating expenses (60%) | 1,773,600 | 726,840 | 2,500,440 |
| Total directly attributable costs | 1,997,100 | 987,440 | 2,984,540 |
Add Answer to:
Anderson Publishing has two divisions: Book Publishing &
Magazine Publishing. The Magazine division has been losing...
Anderson Publishing has two divisions: Book Publishing & Magazine Publishing. The Magazine division has been losing...
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 $ 7,860,000 Magazine Division $ 3,360,000 Total $11, 220,000 Sales Revenue Cost of Goods sold Variable costs Fixed costs Gross Profit Operating Expenses Variable Fixed Net income 2,015,000 78,100 $ 5,766,900 1,015,000 206,000 $ 2,139,000 3,030,000 284,100 $ 7,905, 900...
Anderson Publishing has two divisions: Book Publishing & Magazine Publishing. The Magazine division has been losing...
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...
fill in the missing blanks Anderson Publishing has two divisions: Book Publishing & Magazine Publishing. The...
fill in the missing blanks
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 $ 7,960,000 Magazine Division $ 3,367,700 Total $ 11,327,700 Sales Revenue Cost of Goods sold Variable costs Fixed costs Gross Profit Operating Expenses Variable Fixed Net income 2,160,000 1,093,500 $4,706,500 1,076,800 1,241,200 $ 1,049,700 3,236,809...
The Other Five Divisions Deluxe Division Total Sales $1,664,200 200,000 $1,864,200 Cost of goods sold 978,520...
The Other Five Divisions Deluxe Division Total Sales $1,664,200 200,000 $1,864,200 Cost of goods sold 978,520 156,000 1,134,520 Gross profit 685,680 44,000 729,680 Operating expenses 527,940 80,000 607,940 Net income $ 157,740 S(36,000) $ 121,740 In the Deluxe Division, cost of goods sold is $91,000 variable and $65,000 fixed, and operating expenses are $46,000 variable and $34.000 fixed. If the division is discontinued, all variable costs and $30,000 of the Deluxe Division's fixed operating expenses will be eliminated. Instructions What...
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Cabby Jewelers has two divisions, the ring division and the necklace division. The ring division has shown a net loss of $40,000 for the past year. The necklace division has shown net income of $10,000 for that same period of time. The ring division has avoidable expenses of $30,000 and unavoidable expenses of $20,000. With revenues of $90,000, should the ring division be eliminated? A.Yes, revenue exceeds avoidable costs by $60,000. B.No, revenue exceeds avoidable costs by $60,000. C.No, revenue...
The Cook Corporation has two divisions--East and West. The divisions have the following revenues and expenses:...
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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 $ 7,860,000 Magazine Division $ 3,360,000 Total $11, 220,000 Sales Revenue Cost of Goods sold Variable costs Fixed costs Gross Profit Operating Expenses Variable Fixed Net income 2,015,000 78,100 $ 5,766,900 1,015,000 206,000 $ 2,139,000 3,030,000 284,100 $ 7,905, 900...
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...
fill in the missing blanks
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 $ 7,960,000 Magazine Division $ 3,367,700 Total $ 11,327,700 Sales Revenue Cost of Goods sold Variable costs Fixed costs Gross Profit Operating Expenses Variable Fixed Net income 2,160,000 1,093,500 $4,706,500 1,076,800 1,241,200 $ 1,049,700 3,236,809...
The Other Five Divisions Deluxe Division Total Sales $1,664,200 200,000 $1,864,200 Cost of goods sold 978,520 156,000 1,134,520 Gross profit 685,680 44,000 729,680 Operating expenses 527,940 80,000 607,940 Net income $ 157,740 S(36,000) $ 121,740 In the Deluxe Division, cost of goods sold is $91,000 variable and $65,000 fixed, and operating expenses are $46,000 variable and $34.000 fixed. If the division is discontinued, all variable costs and $30,000 of the Deluxe Division's fixed operating expenses will be eliminated. Instructions What...
A- XYZ Corporation has two divisions—A and B. The divisions have the following revenues and expenses: A B Sales $ 500,000 $ 550,000 Variable costs 200,000 275,000 Traceable fixed costs 150,000 180,000 Allocated common corporate costs 135,000 170,000 Net income (loss) $ 15,000 $ (75,000 ) The management of ABC is considering the elimination of Division B. If the Division B were eliminated, its traceable fixed costs could be avoided. Total common corporate costs would be unaffected by this decision....
The Cook Corporation has two divisions--East and West. The divisions have the following revenues and expenses: Sales Variable costs Traceable fixed costs Allocated common corporate costs Net operating income (loss) East West $601,000 $ 504,000 229,000 298,000 149,500 190,000 126,600 154,000 $ 95,900 $ (138,000) The management of Cook is considering the elimination of the West Division. If the West Division were eliminated, its traceable fixed costs could be avoided. Total common corporate costs would be unaffected by this decision....
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