Chamberline Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated.

Required
a. Explain the effect on profitability if Segment A is eliminated.
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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CHAMBERLINE COMPANY Income Statements for the Year 2011 A Segment Sales Cost of goods sold Sales commissions Contribution margin General fixed oper. exp. (allocation of president's salary) Advertising expense (specific to individual divisions) Net income в $235,000 (121,000) (95,000) (22,000) 121,000 (52,000) (10,000) (15,000) 26,000 (44,000) (3,000) (22,000) 128,000 (44,000) $ 84,000 $(21,000) $ 59,000