Rahul Munoz Company operates three segments. Income statements for the segments imply that profitability could be improved if SegmentA were eliminated.SegmentSalesCost of goods soldSales commissionsContribution marginMUNOZ COMPANYIncome Statements for Year 2ABC$ 171,000(131,000)$ 245,000(88,000)$ 263,000General fixed operating expenses (allocation of president's salary)Advertising expense (specific to individual divisions)Net income (loss)Requireda. Prepare a schedule of relevant sales and costs for Segment A.(16,000)24,000(41,000)(5,000)(28,000)129,000(46,000)(12,000)$ (22,000)$ 71,000(90,000)(29,000)144,000(34,000)0$ 110,000b. 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.

Segmented Income Statement:A segmented income statement provides a more thorough analysis of…

Answered: Munoz Company operates three segments.…

Munoz Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated. Segment MUNOZ COMPANY Income Statements for Year 2

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter18: Pricing And Profitability Analysis

Section: Chapter Questions

Problem 37P

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Question

Rahul

Munoz 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
Contribution margin
MUNOZ COMPANY
Income Statements for Year 2
A
B
C
$ 171,000
(131,000)
$ 245,000
(88,000)
$ 263,000
General fixed operating expenses (allocation of president's salary)
Advertising expense (specific to individual divisions)
Net income (loss)
Required
a. Prepare a schedule of relevant sales and costs for Segment A.
(16,000)
24,000
(41,000)
(5,000)
(28,000)
129,000
(46,000)
(12,000)
$ (22,000)
$ 71,000
(90,000)
(29,000)
144,000
(34,000)
0
$ 110,000
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.

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