Evan Company operates three segments. Income statements for the segments imply that Evan could improve profitability if
Question:
Evan Company operates three segments. Income statements for the segments imply that Evan could improve profitability if Segment X is eliminated.
Required
a. Explain the effect on Evan's profitability if Segment X is eliminated.
b. Prepare comparative income statements for the company as a whole under the two alternatives: (1) Segment X is retained or (2) Segment X is eliminated.
Transcribed Image Text:
THE EVAN COMPANY Income Statement For the Year 2011 Segment х Sales Cost of goods sold Sales commissions $200,000 (85,000) (20,000) $87,000 (67,000) (14,000) 6,000 (20,000) (3,000) $210,000 (82,000) (22,000) Contribution margin General fixed oper. exp. (allocation of president's salary) Advertising expense (specific to individual segments) 106,000 (20,000) (18,000) 95,000 (20,000) S 68,000 $ 75,000 Net income $(17,000)
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a First identify all revenues and costs associated with operating Segment XThese items appear in the ...View the full answer
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Fundamental Managerial Accounting Concepts
ISBN: 978-0078110894
6th Edition
Authors: Edmonds, Tsay, olds
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