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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: Book Division Magazine Division Total Sales Revenue $ 8,120,000 $3,435,400 $ 11,555,400 Cost of Goods sold Variable manufacturing costs 2,320,000 1,156,500 3,476, 500 Fixed manufacturing costs 1,109,500 1,282,400 2,391, 900 Gross Profit $ 4,690,500 $ 996,500 $5,687,000 Operating Expenses Variable operating expenses 167,000 244,900 411, 900 Fixed operating expenses 2,948,000 1,206, 900 4,154,900 Net income $ 1,575,500 $ (455,300) $ 1,120, 200 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: Compute the contribution margin and the segment margin of each division and the company as a whole. 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: Book Division Magazine Division Total Sales Revenue $ 8,120,000 $3,435,400 $ 11,555,400 Cost of Goods sold Variable manufacturing costs 2,320,000 1,156,500 3,476, 500 Fixed manufacturing costs 1,109,500 1,282,400 2,391, 900 Gross Profit $ 4,690,500 $ 996,500 $5,687,000 Operating Expenses Variable operating expenses 167,000 244,900 411, 900 Fixed operating expenses 2,948,000 1,206, 900 4,154,900 Net income $ 1,575,500 $ (455,300) $ 1,120, 200 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: Compute the contribution margin and the segment margin of each division and the company as a whole. What will be the impact on net income if the Magazine Division is eliminated?

FINANCIAL ACCOUNTING
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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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: Book Division Magazine Division Total Sales Revenue $ 8,120,000 $3,435,400 $ 11,555,400 Cost of Goods sold Variable manufacturing costs 2,320,000 1,156,500 3,476, 500 Fixed manufacturing costs 1,109,500 1,282,400 2,391, 900 Gross Profit $ 4,690,500 $ 996,500 $5,687,000 Operating Expenses Variable operating expenses 167,000 244,900 411, 900 Fixed operating expenses 2,948,000 1,206, 900 4,154,900 Net income $ 1,575,500 $ (455,300) $ 1,120, 200 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: Compute the contribution margin and the segment margin of each division and the company as a whole. What will be the impact on net income if the Magazine Division is eliminated?
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: Book Division Magazine Division Total Sales Revenue $ 8,120,000 $3,435,400 $ 11,555,400 Cost of Goods sold Variable manufacturing costs 2,320,000 1,156,500 3,476, 500 Fixed manufacturing costs 1,109,500 1,282,400 2,391, 900 Gross Profit $ 4,690,500 $ 996,500 $5,687,000 Operating Expenses Variable operating expenses 167,000 244,900 411, 900 Fixed operating expenses 2,948,000 1,206, 900 4,154,900 Net income $ 1,575,500 $ (455,300) $ 1,120, 200 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: Compute the contribution margin and the segment margin of each division and the company as a whole. What will be the impact on net income if the Magazine Division is eliminated?
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