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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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).
Magazine
Division
Variable costs
Direct fixed costs
Common fixed costs
Net income (loss)
Book Division
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
What will be the impact on net income if the Magazine Division is eliminated?
Impact on net income.
Total
Transcribed Image Text: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?
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