The president of Eaglesway Incorporated attended a seminar about the contribution margin model andreturned to her company full of enthusiasm about it. She requested that last year's traditional model incomestatement be revised, and she received the following report:SalesVariable expensesContribution marginFixed expensesNet income (loss)Total Company$430,000252,000$ 178,000136,000$ 42,000X$ 170,000109,000$ 61,00045,000$ 16,000DivisionY$ 110,00062,000$ 48,00050,000$ (2,000)Z$ 150,00081,000$ 69,00041,000$ 28,000The president was told that the fixed expenses of $136,000 included $96,000 that had been split evenlybetween divisions because they were general corporate expenses. After looking at the statement, thepresident exclaimed, "I knew it! Division Y is a drag on the whole company. Close it down!"Required:a. Evaluate the president's remark.b. Calculate what the company's net income would be if Division Y were closed down.c. What is the policy statement related to the allocation of fixed expenses?

Net income, which is the amount that's left over after all expenses and liabilities are subtracted,…

Answered: The president was told that the fixed…

The president was told that the fixed expenses of $136,000 included $96,000 that between divisions because they were general corporate expenses. After looking a

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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