Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows: Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on the equipment is dedicated to the product lines. None of the equipment can be sold. Refer to the information for Petoskey Company above. Assume that each of the three products has a different supervisor whose position would be eliminated if the associated product were dropped. Required: Conceptual Connection Estimate the impact on profit that would result from dropping Conway. Explain why Petoskey should keep or drop Conway.
Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows: Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on the equipment is dedicated to the product lines. None of the equipment can be sold. Refer to the information for Petoskey Company above. Assume that each of the three products has a different supervisor whose position would be eliminated if the associated product were dropped. Required: Conceptual Connection Estimate the impact on profit that would result from dropping Conway. Explain why Petoskey should keep or drop Conway.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows:
Direct fixed expenses consist of
Refer to the information for Petoskey Company above. Assume that each of the three products has a different supervisor whose position would be eliminated if the associated product were dropped.
Required:
-
Conceptual Connection Estimate the impact on profit that would result from dropping Conway. Explain why Petoskey should keep or drop Conway.
Transcribed Image Text:Alanson
Воyne
Conway
Total
Sales revenue
$1,280
$185
$300
$1,765
Less: Variable expenses
Contribution margin
1,115
45
225
1,385
$ 165
$140
$ 75
$ 380
Less direct fixed expenses:
Depreciation
50
15
10
75
Salaries
95
85
80
260
Segment margin
$
20
$ 40
$ (15)
$ 45
%24
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