Anderson Publishing has two divisions: Book Publishing and Magazine Publishing. The Magazine division has been losing money for the last five years and Anderson is considering eliminating that division. Anderson's information about the two divisions is as follows: Sales Revenue Cost of Goods sold Variable manufacturing costs Fixed manufacturing costs Gross Profit Operating Expenses Variable operating expenses Fixed operating expenses Net income Book Division $8,060,000 2,260,000 1,103,500 $4,696,500 161,000 2,942,000 $1,593,500 Magazine Division $ 3,410,000 1,126,600 1,267,000 $1,016,400 236,100 1,203,500 $ (423,200) Total $ 11,470,000 3,386,600 2,370,500 $5,712,900 397,100 4,145,500 $ 1,170,300 Only 20 percent of the fixed manufacturing costs and 60 percent of the fixed operating expenses are directly attributable to each division. The remaining 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?

Anderson Publishing has two divisions: Book Publishing and Magazine Publishing. The Magazine division has been losing money for the last five years and Anderson is considering eliminating that division. Anderson's information about the two divisions is as follows: Sales Revenue Cost of Goods sold Variable manufacturing costs Fixed manufacturing costs Gross Profit Operating Expenses Variable operating expenses Fixed operating expenses Net income Book Division $8,060,000 2,260,000 1,103,500 $4,696,500 161,000 2,942,000 $1,593,500 Magazine Division $ 3,410,000 1,126,600 1,267,000 $1,016,400 236,100 1,203,500 $ (423,200) Total $ 11,470,000 3,386,600 2,370,500 $5,712,900 397,100 4,145,500 $ 1,170,300 Only 20 percent of the fixed manufacturing costs and 60 percent of the fixed operating expenses are directly attributable to each division. The remaining 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?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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