Example: A store with four departments is considering closing one of its departments based on the following departmental income statement: Sample Company Income Statement (000 omitted) Departments Total A B D Sales $130 $40 $40 $30 $20 Variable Costs 86 21 21 26 15 Segment Contribution Margin 44 19 16 Fixed Costs: Direct Costs 19 2 3* Segment Margin 25 12 Allocated Common Costs* 12 4 4 1 Departmental Net Income (Loss) $13 $8 $5 $1 $(1) * $1,000 depreciation, $2,000 salaries ** Allocated based on space occupied Would closing Department D improve overall company profitability? (Assume that the equipment is retained but that personnel are laid off.) 2.
Example: A store with four departments is considering closing one of its departments based on the following departmental income statement: Sample Company Income Statement (000 omitted) Departments Total A B D Sales $130 $40 $40 $30 $20 Variable Costs 86 21 21 26 15 Segment Contribution Margin 44 19 16 Fixed Costs: Direct Costs 19 2 3* Segment Margin 25 12 Allocated Common Costs* 12 4 4 1 Departmental Net Income (Loss) $13 $8 $5 $1 $(1) * $1,000 depreciation, $2,000 salaries ** Allocated based on space occupied Would closing Department D improve overall company profitability? (Assume that the equipment is retained but that personnel are laid off.) 2.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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