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If Carolina can avoid all the fixed costs allocated to any segment when such segment is dropped, should the sink segment be dropped?

If Carolina can avoid all the fixed costs allocated to any segment when such segment is dropped, should the sink segment be dropped?

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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Carolina Enterprise operates three product segments: sinks, bathtubs, and toilet bowls. Below are the figures showing how each product segment performed in 2022. If Carolina can avoid all the fixed costs allocated to any segment when such segment is dropped, should the sink segment be dropped? Sales Variable costs Contribution margin Fixed costs Net operating income Sinks P450,000 (220,000) 230,000 (250,000) P(20,000) Bathtubs P520,000 (315,000) 205,000 (180,000) P25,000 Toilet Bowls P480,000 (280,000 200,000 (140,000 P60,000 Yes, because dropping the sink segment will cause Carolina's total net operating income to increase by P30,000. No, because dropping the sink segment will cause Carolina's total net operating income to decrease by P20,000. Yes, because dropping the sink segment will cause Carolina's total net operating income to increase by P20,000. No, because dropping the sink segment will cause Carolina's total net operating income to decrease by P30,000.
Transcribed Image Text:Carolina Enterprise operates three product segments: sinks, bathtubs, and toilet bowls. Below are the figures showing how each product segment performed in 2022. If Carolina can avoid all the fixed costs allocated to any segment when such segment is dropped, should the sink segment be dropped? Sales Variable costs Contribution margin Fixed costs Net operating income Sinks P450,000 (220,000) 230,000 (250,000) P(20,000) Bathtubs P520,000 (315,000) 205,000 (180,000) P25,000 Toilet Bowls P480,000 (280,000 200,000 (140,000 P60,000 Yes, because dropping the sink segment will cause Carolina's total net operating income to increase by P30,000. No, because dropping the sink segment will cause Carolina's total net operating income to decrease by P20,000. Yes, because dropping the sink segment will cause Carolina's total net operating income to increase by P20,000. No, because dropping the sink segment will cause Carolina's total net operating income to decrease by P30,000.
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