Valley Incorporated has three divisions, Almond, Grover and Oak. The following is the contribution margin income statement for the previous year: Almond Grover Oak Total Sales revenue $ 500,000 $ 275,000 $ 225,000 $ 1,000,000 Variable costs 175,000 125,000 100,000 400,000 Contribution margin $ 325,000 $ 150,000 $ 125,000 $ 600,000 Fixed costs 275,000 151,250 123,750 550,000 Net operating income (loss) $ 50,000 $(1,250) $ 1,250 $ 50,000 Of the fixed costs, $300,000 are common costs that are allocated equally to the three divisions. Required: How much does Grover Division have in direct fixed costs? What is Grover Division's segment margin? What would Valley's net income (loss) be if the Grover Division were dropped?
Valley Incorporated has three divisions, Almond, Grover and Oak. The following is the contribution margin income statement for the previous year: Almond Grover Oak Total Sales revenue $ 500,000 $ 275,000 $ 225,000 $ 1,000,000 Variable costs 175,000 125,000 100,000 400,000 Contribution margin $ 325,000 $ 150,000 $ 125,000 $ 600,000 Fixed costs 275,000 151,250 123,750 550,000 Net operating income (loss) $ 50,000 $(1,250) $ 1,250 $ 50,000 Of the fixed costs, $300,000 are common costs that are allocated equally to the three divisions. Required: How much does Grover Division have in direct fixed costs? What is Grover Division's segment margin? What would Valley's net income (loss) be if the Grover Division were dropped?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Valley Incorporated has three divisions, Almond, Grover and Oak. The following is the contribution margin income statement for the previous year:
| Almond | Grover | Oak | Total | |
|---|---|---|---|---|
| Sales revenue | $ 500,000 | $ 275,000 | $ 225,000 | $ 1,000,000 |
| Variable costs | 175,000 | 125,000 | 100,000 | 400,000 |
| Contribution margin | $ 325,000 | $ 150,000 | $ 125,000 | $ 600,000 |
| Fixed costs | 275,000 | 151,250 | 123,750 | 550,000 |
| Net operating income (loss) | $ 50,000 | $(1,250) | $ 1,250 | $ 50,000 |
Of the fixed costs, $300,000 are common costs that are allocated equally to the three divisions.
Required:
- How much does Grover Division have in direct fixed costs?
- What is Grover Division's segment margin?
- What would Valley's net income (loss) be if the Grover Division were dropped?
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