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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 remain 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 remain 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.

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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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 remain if the associated product were dropped.

Required:

  1. Conceptual Connection Estimate the impact on profit that would result from dropping Conway. Explain why Petoskey should keep or drop Conway.

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
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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