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Discontinuing a Segment Anthropologie, owned by URBN, sells both standard and custom size furniture items. Assume that the contribution income statements for both segments follow. Standard Custom Total Sales $2,000,000 $220,000 $2,220,000 Less variable costs 1, 200,000 176,000 1,376,000 Contribution margin 800,000 44,000 844, 000 Less fixed costs 600, 000 77,000 677,000 Net income (loss) $200,000 $ (33,000) $167,000 Management is considering discontinuing the Custom segment due to the segment's net loss of $33,000. Of the total fixed costs for the Custom segment, $22,000 would not be incurred (a cost saving) if the Custom segment is dropped. Management expects no changes to the sales of the Standard segment if the Custom segment is discontinued. REQUIRED If the Custom segment is discontinued, what will be the net effect on the profit of the company? Note: enter all numbers as positive numbers, do NOT use a negative sign. Profits would Answer increase by SAnswer.

Discontinuing a Segment Anthropologie, owned by URBN, sells both standard and custom size furniture items. Assume that the contribution income statements for both segments follow. Standard Custom Total Sales $2,000,000 $220,000 $2,220,000 Less variable costs 1, 200,000 176,000 1,376,000 Contribution margin 800,000 44,000 844, 000 Less fixed costs 600, 000 77,000 677,000 Net income (loss) $200,000 $ (33,000) $167,000 Management is considering discontinuing the Custom segment due to the segment's net loss of $33,000. Of the total fixed costs for the Custom segment, $22,000 would not be incurred (a cost saving) if the Custom segment is dropped. Management expects no changes to the sales of the Standard segment if the Custom segment is discontinued. REQUIRED If the Custom segment is discontinued, what will be the net effect on the profit of the company? Note: enter all numbers as positive numbers, do NOT use a negative sign. Profits would Answer increase by SAnswer.

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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Discontinuing a Segment Anthropologie, owned by URBN, sells both standard and custom size furniture items. Assume that the contribution income statements for both segments follow. Standard Custom Total Sales $2,000,000 $220,000 $2,220, 000 Less variable costs 1,200,000 176, 000 1,376,000 Contribution margin 800, 000 44,000 844, 000 Less fixed costs 600,000 77,000 677,000 Net income (loss) $200,000 $ (33,000) $167,000 Management is considering discontinuing the Custom segment due to the segment's net loss of $33,000. Of the total fixed costs for the Custom segment, $22,000 would not be incurred (a cost saving) if the Custom segment is dropped. Management expects no changes to the sales of the Standard segment if the Custom segment is discontinued. REQUIRED If the Custom segment is discontinued, what will be the net effect on the profit of the company? Note: enter all numbers as positive numbers, do NOT use a negative sign. Profits would Answer increase by $Answer.
Transcribed Image Text:Discontinuing a Segment Anthropologie, owned by URBN, sells both standard and custom size furniture items. Assume that the contribution income statements for both segments follow. Standard Custom Total Sales $2,000,000 $220,000 $2,220, 000 Less variable costs 1,200,000 176, 000 1,376,000 Contribution margin 800, 000 44,000 844, 000 Less fixed costs 600,000 77,000 677,000 Net income (loss) $200,000 $ (33,000) $167,000 Management is considering discontinuing the Custom segment due to the segment's net loss of $33,000. Of the total fixed costs for the Custom segment, $22,000 would not be incurred (a cost saving) if the Custom segment is dropped. Management expects no changes to the sales of the Standard segment if the Custom segment is discontinued. REQUIRED If the Custom segment is discontinued, what will be the net effect on the profit of the company? Note: enter all numbers as positive numbers, do NOT use a negative sign. Profits would Answer increase by $Answer.
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