Thornton Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated. Segment Sales Cost of goods sold Sales commissions THORNTON COMPANY Income Statements for Year 2 Contribution margin General fixed operating expenses (allocation of president's salary) Advertising expense (specific to individual divisions) Net Income (loss) $ 163,000 (127,000) (19,000) 17,000 (37,000) (5,000) B $254,000 $259,000 (79,000) (31,000) 144,000 (34,000) (17,000) $ (25,000) $ 93,000 (85,000) (24,000) 150,000 (43,000) $107,000 Required a. Prepare a schedule of relevant sales and costs for Segment A b. Prepare comparative Income statements for the company as a whole under two alternatives: (1) the retention of Segment A and (2) the elimination of Segment A
Thornton Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated. Segment Sales Cost of goods sold Sales commissions THORNTON COMPANY Income Statements for Year 2 Contribution margin General fixed operating expenses (allocation of president's salary) Advertising expense (specific to individual divisions) Net Income (loss) $ 163,000 (127,000) (19,000) 17,000 (37,000) (5,000) B $254,000 $259,000 (79,000) (31,000) 144,000 (34,000) (17,000) $ (25,000) $ 93,000 (85,000) (24,000) 150,000 (43,000) $107,000 Required a. Prepare a schedule of relevant sales and costs for Segment A b. Prepare comparative Income statements for the company as a whole under two alternatives: (1) the retention of Segment A and (2) the elimination of Segment A
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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
Transcribed Image Text:Problem: Module 6 Textbook Problem 7
Learning Objective: 6-4 Make appropriate segment elimination decisions
Thornton Company operates three segments. Income statements for the segments imply that profitability could be improved if
Segment A were eliminated.
Segment
Sales
Cost of goods sold
Sales commissions
THORNTON COMPANY
Income Statements for Year 2
Contribution margin
General fixed operating expenses (allocation of president's salary)
Advertising expense (specific to individual divisions)
Net income (loss)
$ 163,000
(127,000)
(19,000)
17,000
(37,000)
(5,000)
B
$254,000 $259,000
(85,000)
(24,000)
(79,000)
(31,000)
144,000
(34,000)
(17,000)
$ (25,000) $ 93,000 $107,000
150,000
(43,000)
Required
a. Prepare a schedule of relevant sales and costs for Segment A.
b. Prepare comparative income statements for the company as a whole under two alternatives: (1) the retention of Segment A and (2)
the elimination of Segment A

Transcribed Image Text:Required
a. Prepare a schedule of relevant sales and costs for Segment A.
b. Prepare comparative income statements for the company as a whole under two alternatives: (1) the retention of Segment A and (2)
the elimination of Segment A
Complete this question by entering your answers in the tabs below.
Required A Required B
Prepare a schedule of relevant sales and costs for Segment A.
Relevant Rev. and Cost items for Segment A
Sales
Effect on income
Required
a. Prepare a schedule of relevant sales and costs for Segment A.
b. Prepare comparative income statements for the company as a whole under two alternatives: (1) the retention of Segment A and (2)
the elimination of Segment A.
Complete this question by entering your answers in the tabs below.
Required A Required B
Prepare comparative income statements for the company as a whole under two alternatives: (1) the retention of Segment A
and (2) the elimination of Segment A
THORNTON COMPANY
Comparative Income Statements for the Year 2
Keep Seg. A
Decision
Sales
Cost of goods sold
Sales commissions
Contribution margin
General fixed operating expenses
Advertising expense
Net Income
S
Required B >
$
Eliminate Seg. A
0 $
0$
0
0
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