Party Supply is trying to decide whether or not to continue its costume segment. The information shown is available for Party Supply's business segments. Assume that neither the Direct fixed costs nor the Allocated common fixed costs may be eliminated, but will be allocated to the two remaining segments. Sales Variable costs Contribution margin Direct fixed costs Allocated common fixed costs Party Supply segment data Costumes Party Supplies $160,000 $110,000 84,000 50,000 76,000 50,000 30,000 60,000 20,000 25,000 Floral Decorations $210,000 120,000 90,000 25,000 30,000

Party Supply is trying to decide whether or not to continue its costume segment. The information shown is available for Party Supply's business segments. Assume that neither the Direct fixed costs nor the Allocated common fixed costs may be eliminated, but will be allocated to the two remaining segments. Sales Variable costs Contribution margin Direct fixed costs Allocated common fixed costs Party Supply segment data Costumes Party Supplies $160,000 $110,000 84,000 50,000 76,000 50,000 30,000 60,000 20,000 25,000 Floral Decorations $210,000 120,000 90,000 25,000 30,000

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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! Required information [The following information applies to the questions displayed below.] Raner, Harris and Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices-one in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the company's most recent year is given: Sales Variable expenses Contribution margin Traceable fixed expenses Office segment margin Common fixed expenses not traceable to offices Net operating income Total Company Net operating income increase $ 463,500 231,750 231,750 129,780 101,970 64,890 $ 37,080 100.00% 50.00% 50.00% 28.00% 22.00% 14.00% 8.00% Chicago $ 154,500 46,350 108,150 80, 340 $ 27,810 Office 100.00% 30.00% 70.00% 52.00% 18.00% Minneapolis $ 309,000 185,400 123,600 49,440 $ 74,160 100.00% 60.00% 40.00% 16.00% 24.00% 2. By how much would the company's net operating income increase…
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Party Supply is trying to decide if they should continue its costume segment. The information shown is available for Party Supply’s business segments. Assume that neither the Direct Fixed Costs nor the Allocated Common Fixed Costs may be eliminated, but will be allocated to the two remaining segments. Costumes Party Supplies Floral Decorations Sales $160,000 $110,000 $210,000 Variable Costs 84,000 50,000 120,000 Contribution Margin 76,000 60,000 90,000 Direct Fixed Costs 50,000 20,000 25,000 Allocated Common Fixed Costs 30,000 25,000 30,000 Net Income (Loss) (4,000) 15,000 35,000 If costumes are dropped, what change will occur to profit?
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