Thornton Transport Company divides its operations into four divisions. A recent income statement for its West Division follows: THORNTON TRANSPORT COMPANY West Division Income Statement for the Year 2019 Revenue $ 660,000 Salaries for drivers (510,000) (66,000) (86,000) (56,000) Fuel expenses Insurance Division-level facility-sustaining costs Companywide facility-sustaining costs (146,000) Net loss $(204,000) 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 $750,000 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 $750,000? c. What is the minimum amount of revenue required to justify continuing the operation of West Division?
Thornton Transport Company divides its operations into four divisions. A recent income statement for its West Division follows: THORNTON TRANSPORT COMPANY West Division Income Statement for the Year 2019 Revenue $ 660,000 Salaries for drivers (510,000) (66,000) (86,000) (56,000) Fuel expenses Insurance Division-level facility-sustaining costs Companywide facility-sustaining costs (146,000) Net loss $(204,000) 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 $750,000 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 $750,000? c. What is the minimum amount of revenue required to justify continuing the operation of West Division?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Thornton Transport Company divides its operations into four divisions. A recent income statement for its West Division follows:
THORNTON TRANSPORT COMPANY
West Division
Income Statement for the Year 2019
Revenue
$ 660,000
Salaries for drivers
(510,000)
(66,000)
(86,000)
(56,000)
Fuel expenses
Insurance
Division-level facility-sustaining costs
Companywide facility-sustaining costs
(146,000)
Net loss
$(204,000)
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 $750,000 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 $750,000?
c. What is the minimum amount of revenue required to justify continuing the operation of West Division?
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