Question

Mason Transport Company divides its operations into four divisions. A recent income statement for its West Division follows.
MASON TRANSPORT COMPANY
West Division
Income Statement for the Year 2015
Revenue .................... $ 250,000
Salaries for drivers ............... (175,000)
Fuel expenses ................ (25,000)
Insurance ................... (35,000)
Division-level facility-sustaining costs ...... (20,000)
Companywide facility-sustaining costs ...... (65,000)
Net loss .................. $ (70,000)

Required
a. Should West Division be eliminated? Support your answer by explaining how the division’s elimination would affect the net income of the company as a whole. By how much would companywide income increase or decrease?
b. Assume that West Division is able to increase its revenue to $270,000 by raising its prices. Would this change the decision you made in Requirement a? Determine the amount of the increase or decrease that would occur in companywide net income if the segment were eliminated if revenue were $270,000.
c. What is the minimum amount of revenue required to justify continuing the operation of West Division?



$1.99
Sales43
Views992
Comments0
  • CreatedFebruary 07, 2014
  • Files Included
Post your question
5000