Franklin Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated. FRANKLIN COMPANY Income Statements for Year 2 Segment A B C Sales $ 164,000 $238,000 $263,000 Cost of goods sold Sales commissions Contribution margin (123,000) (84,000) (86,000) (15,000) (26,000) (29,000) 26,000 128,000 148,000 General fixed operating expenses (allocation of president's salary) Advertising expense (specific to individual divisions) (40,000) (37,000) (24,000) (6,000) (13,000) 0 Net income (loss) $ (20,000) $ 78,000 $124,000 Required a. Prepare a schedule of relevant sales and costs for Segment A. b. Prepare comparative income statements for the company as a whole under two alternatives: (1) the retention of Segment A and (2) the elimination of Segment A.
Franklin Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated. FRANKLIN COMPANY Income Statements for Year 2 Segment A B C Sales $ 164,000 $238,000 $263,000 Cost of goods sold Sales commissions Contribution margin (123,000) (84,000) (86,000) (15,000) (26,000) (29,000) 26,000 128,000 148,000 General fixed operating expenses (allocation of president's salary) Advertising expense (specific to individual divisions) (40,000) (37,000) (24,000) (6,000) (13,000) 0 Net income (loss) $ (20,000) $ 78,000 $124,000 Required a. Prepare a schedule of relevant sales and costs for Segment A. b. Prepare comparative income statements for the company as a whole under two alternatives: (1) the retention of Segment A and (2) the elimination of Segment A.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Franklin Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment
A were eliminated.
FRANKLIN COMPANY
Income Statements for Year 2
Segment
Sales
Cost of goods sold
Sales commissions
Contribution margin
A
B
с
$ 164,000
$238,000
$263,000
(123,000)
(84,000)
(86,000)
(15,000)
(26,000)
(29,000)
26,000
128,000
148,000
General fixed operating expenses (allocation of president's salary)
Advertising expense (specific to individual divisions)
(40,000)
(37,000)
(24,000)
(6,000)
(13,000)
0
Net income (loss)
$ (20,000) $ 78,000
$124,000
Required
a. Prepare a schedule of relevant sales and costs for Segment A.
b. Prepare comparative income statements for the company as a whole under two alternatives: (1) the retention of Segment A and (2)
the elimination of Segment A.
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