Zachary Transport Company divides its operations into four divisions. A recent income statement for its West Division follows. ZACHARY TRANSPORT COMPANY West Division Income Statement for Year 3 $ 690,000 (540,000) (69,000) (89,000) (59,000) (149,000) $(216,000) Revenue Salaries for drivers Fuel expenses Insurance Division-level facility-sustaining costs Companywide facility-sustaining costs Net loss Required a. By how much would companywide income increase or decrease if West Division is eliminated? Should West Division be eliminated? b. Assume that West Division is able to increase its revenue to $780,000 by raising its prices. Determine the amount of the increase or decrease that would occur in companywide net income if the segment were eliminated. Should West Division be eliminated if revenue were $780,000? c. What is the minimurn amount of revenue required to justify continuing the operation of West Division?

Zachary Transport Company divides its operations into four divisions. A recent income statement for its West Division follows. ZACHARY TRANSPORT COMPANY West Division Income Statement for Year 3 $ 690,000 (540,000) (69,000) (89,000) (59,000) (149,000) $(216,000) Revenue Salaries for drivers Fuel expenses Insurance Division-level facility-sustaining costs Companywide facility-sustaining costs Net loss Required a. By how much would companywide income increase or decrease if West Division is eliminated? Should West Division be eliminated? b. Assume that West Division is able to increase its revenue to $780,000 by raising its prices. Determine the amount of the increase or decrease that would occur in companywide net income if the segment were eliminated. Should West Division be eliminated if revenue were $780,000? c. What is the minimurn amount of revenue required to justify continuing the operation of West Division?

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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