nderson Publishing has two divisions: Book Publishing and Magazine Publishing. The Magazine division has been losing money for the last five years and Anderson is considering eliminating that division. Anderson’s information about the two divisions is as follows: Book Division Magazine Division Total Sales Revenue $ 7,840,000 $ 3,316,900 $ 11,156,900 Cost of Goods sold Variable manufacturing costs 2,040,000 1,016,900 3,056,900 Fixed manufacturing costs 1,081,500 1,210,300 2,291,800 Gross Profit $ 4,718,500 $ 1,089,700 $ 5,808,200 Operating Expenses Variable operating expenses 139,000 203,900 342,900 Fixed operating expenses 2,920,000 1,191,200 4,111,200 Net income $ 1,659,500 $ (305,400) $ 1,354,100 Only 20 percent of the fixed manufacturing costs and 60 percent of the fixed operating expenses are directly attributable to each division. The remaining are common or shared between the two divisions. Required: Present the financial information in the form of a segmented income statement (using the contribution margin approach). What will be the impact on net income if the Magazine Division is eliminated?
nderson Publishing has two divisions: Book Publishing and Magazine Publishing. The Magazine division has been losing money for the last five years and Anderson is considering eliminating that division. Anderson’s information about the two divisions is as follows: Book Division Magazine Division Total Sales Revenue $ 7,840,000 $ 3,316,900 $ 11,156,900 Cost of Goods sold Variable manufacturing costs 2,040,000 1,016,900 3,056,900 Fixed manufacturing costs 1,081,500 1,210,300 2,291,800 Gross Profit $ 4,718,500 $ 1,089,700 $ 5,808,200 Operating Expenses Variable operating expenses 139,000 203,900 342,900 Fixed operating expenses 2,920,000 1,191,200 4,111,200 Net income $ 1,659,500 $ (305,400) $ 1,354,100 Only 20 percent of the fixed manufacturing costs and 60 percent of the fixed operating expenses are directly attributable to each division. The remaining are common or shared between the two divisions. Required: Present the financial information in the form of a segmented income statement (using the contribution margin approach). What will be the impact on net income if the Magazine Division is eliminated?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Anderson Publishing has two divisions: Book Publishing and Magazine Publishing. The Magazine division has been losing money for the last five years and Anderson is considering eliminating that division. Anderson’s information about the two divisions is as follows:
| Book Division | Magazine Division | Total | |
|---|---|---|---|
| Sales Revenue | $ 7,840,000 | $ 3,316,900 | $ 11,156,900 |
| Cost of Goods sold | |||
| Variable |
2,040,000 | 1,016,900 | 3,056,900 |
| Fixed manufacturing costs | 1,081,500 | 1,210,300 | 2,291,800 |
| Gross Profit | $ 4,718,500 | $ 1,089,700 | $ 5,808,200 |
| Operating Expenses | |||
| Variable operating expenses | 139,000 | 203,900 | 342,900 |
| Fixed operating expenses | 2,920,000 | 1,191,200 | 4,111,200 |
| Net income | $ 1,659,500 | $ (305,400) | $ 1,354,100 |
Only 20 percent of the fixed manufacturing costs and 60 percent of the fixed operating expenses are directly attributable to each division. The remaining are common or shared between the two divisions.
Required:
- Present the financial information in the form of a segmented income statement (using the contribution margin approach).
- What will be the impact on net income if the Magazine Division is eliminated?
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