## Party Supply Segment AnalysisParty Supply is evaluating whether to continue its costume segment. The data provided highlights each business segment's financial contributions. Essential assumptions include that neither Direct Fixed Costs nor Allocated Common Fixed Costs may be eliminated; they will be distributed among the remaining segments.### Segment Data Overview| | 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** | ($4,000) | $15,000 | $35,000 |### Consideration of Dropping the Costume SegmentThe table above outlines the financial details for each segment:- **Costumes**: Generates a negative net income of ($4,000).- **Party Supplies**: Shows a net income of $15,000.- **Floral Decorations**: Achieves a net income of $35,000.### Profit Impact AnalysisIf the costume segment is discontinued, it's crucial to analyze the impact on overall profit. Note how fixed costs, both direct and common, are redistributed and affect other segments.The table allows easy assessment of financial outcomes and strategic planning:- **Direct Fixed Costs** might increase for remaining segments since they can't be eradicated.- **Contribution Margin**: Understanding its variation helps gauge the direct impact on net incomes.### ConclusionEvaluate changes in profit when removing a segment to assist decisive business strategies. Properly reallocating costs is vital to maintaining or even boosting overall profitability.

In evaluating, whether continue to invest or not in a division, the company should calculate the…

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 Net income Party Supply segment data Costumes Party Supplies $110,000 50,000 60,000 $160,000 84,000 76,000 50,000 30,000 20,000 25,000 Floral Decorations $210,000 120,000 90,000 25,000 30.000 $(4,000) $15,000 $35,000 If costumes are dropped, what change will occur to profit? If the effect is negative, use a dash - not parentheses ().

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 Net income Party Supply segment data Costumes Party Supplies $110,000 50,000 60,000 $160,000 84,000 76,000 50,000 30,000 20,000 25,000 Floral Decorations $210,000 120,000 90,000 25,000 30.000 $(4,000) $15,000 $35,000 If costumes are dropped, what change will occur to profit? If the effect is negative, use a dash - not parentheses ().

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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