Edward Lewis was reviewing the latest income statement for Sunland Communications. For the second year in a row, the Audio division was showing a negative segment margin, and Edward thought it was time to close the division to increase the company's operating income. The income statement that he examined follows. Sales revenue Less variable expenses Contribution margin Less traceable fixed expenses Segment margin Common fixed costs Net operating income Video Division $5,302,700 3,663,800 1,638,900 946,400 $692,500 Audio Division $2,861,500 1,645,600 1,215,900 1,275,100 $(59,200) Total $8,164,200 5,309,400 2,854,800 2,221,500 633,300 586,000 $47,300 When Edward broke the news, Ruth Lee, manager of the Audio division, was upset. Ruth thought that Edward could be making a decision too quickly, and suggested that he look at the division's detailed operating results. The Audio division is composed of two groups, Streaming and CD. Streaming accounts for 75% of the division's sales and contribution margin; CD accounts for the other 25%. Streaming's traceable fixed costs are $451,900; CD, $351,900.
Edward Lewis was reviewing the latest income statement for Sunland Communications. For the second year in a row, the Audio division was showing a negative segment margin, and Edward thought it was time to close the division to increase the company's operating income. The income statement that he examined follows. Sales revenue Less variable expenses Contribution margin Less traceable fixed expenses Segment margin Common fixed costs Net operating income Video Division $5,302,700 3,663,800 1,638,900 946,400 $692,500 Audio Division $2,861,500 1,645,600 1,215,900 1,275,100 $(59,200) Total $8,164,200 5,309,400 2,854,800 2,221,500 633,300 586,000 $47,300 When Edward broke the news, Ruth Lee, manager of the Audio division, was upset. Ruth thought that Edward could be making a decision too quickly, and suggested that he look at the division's detailed operating results. The Audio division is composed of two groups, Streaming and CD. Streaming accounts for 75% of the division's sales and contribution margin; CD accounts for the other 25%. Streaming's traceable fixed costs are $451,900; CD, $351,900.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please Fast Answering Please And Do Not Give Solution In Image Format ? And please explain proper steps by Step.
Transcribed Image Text:(a)
Prepare a segment margin income statement for the Audio division that shows the segment margin of each group. (If the amount is
negative then enter with a negative sign preceding the number, e.g. -5,125 or parenthesis, e.g. (5,125) and round answers to O decimal
places, e.g. 5,125.)
(b)
Horro
$
Should Edward Lewis close the Audio Division?
Jim should consider closing
Streaming
$
Show Transcribed Text
CD
$
Total Audio Division
Transcribed Image Text:Edward Lewis was reviewing the latest income statement for Sunland Communications. For the second year in a row, the Audio
division was showing a negative segment margin, and Edward thought it was time to close the division to increase the company's
operating income. The income statement that he examined follows.
Sales revenue
Less variable expenses
Contribution margin
Less traceable fixed expenses
Segment margin
Common fixed costs
Net operating income
Video
Audio
Division
Division
$5,302,700 $2,861,500
1,645,600
3,663,800
1,638,900
946,400
$692,500
1,215,900
1,275,100
$(59,200)
Total
$8,164,200
5,309,400
2,854,800
2,221,500
633,300
586,000
$47,300
When Edward broke the news, Ruth Lee, manager of the Audio division, was upset. Ruth thought that Edward could be making a
decision too quickly, and suggested that he look at the division's detailed operating results. The Audio division is composed of two
groups, Streaming and CD. Streaming accounts for 75% of the division's sales and contribution margin; CD accounts for the other
25%. Streaming's traceable fixed costs are $451,900; CD, $351,900.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education