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Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows: Alanson Воyne Conway Total Sales revenue $1,280 $185 $300 $1,765 Less: Variable expenses Contribution margin Less direct fixed expenses: Depreciation 1,115 45 225 1,385 $ 165 $140 $ 75 $ 380 50 15 10 75 Salaries 85 $ 40 95 80 260 Segment margin $ 20 $(15 $ 45

Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows: Alanson Воyne Conway Total Sales revenue $1,280 $185 $300 $1,765 Less: Variable expenses Contribution margin Less direct fixed expenses: Depreciation 1,115 45 225 1,385 $ 165 $140 $ 75 $ 380 50 15 10 75 Salaries 85 $ 40 95 80 260 Segment margin $ 20 $(15 $ 45

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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Keep-or-Drop Decision
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: Alanson Воyne Conway Total Sales revenue $1,280 $185 $300 $1,765 Less: Variable expenses Contribution margin Less direct fixed expenses: Depreciation 1,115 45 225 1,385 $ 165 $140 $ 75 $ 380 50 15 10 75 Salaries 85 $ 40 95 80 260 Segment margin $ 20 $(15 $ 45
Transcribed Image Text:Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows: Alanson Воyne Conway Total Sales revenue $1,280 $185 $300 $1,765 Less: Variable expenses Contribution margin Less direct fixed expenses: Depreciation 1,115 45 225 1,385 $ 165 $140 $ 75 $ 380 50 15 10 75 Salaries 85 $ 40 95 80 260 Segment margin $ 20 $(15 $ 45
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