Segment elimination decision
Baich Transport Company divides its operations into four divisions. A recent income statement for Koslov Division follows.
BAICH TRANSPORT COMPANY Koslov Division Income Statement for the Year 2012 | |
Revenue | $ 500,000 |
Salaries for drivers | (350,000) |
Fuel expenses | (50,000) |
Insurance | (70,000) |
Division-level facility-sustaining costs | (40,000) |
Companywide facility-sustaining costs | (130,000) |
Net loss | $(140,000) |
Required
a.Should Koslov Division be eliminated? Support your answer by explaining how the division’s elimination would affect the net income of the company as a whole. By how much would companywide income increase or decrease?
b. Assume that Koslov Division is able to increase its revenue to $540,000 by raising its prices. Would this change the decision you made in Requirement a? Determine the amount of the increase or decrease that would occur in companywide net income if the segment were eliminated if revenue were $540,000.
c. What is the minimum amount of revenue required to justify continuing the operation of Koslov Division?
We need at least 10 more requests to produce the solution.
0 / 10 have requested this problem solution
The more requests, the faster the answer.