Reid Company operates three segments. Income statements for the segments imply that Reid could improve profitability by eliminating Segment X.

Required
a. Explain the effect on Reid'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.

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REID COMPANY Income Statement For the Year 2018 Segment Sales Cost of goods sold Sales commissions Contribution margin General fixed oper. exp. (allocation of president's salary) Advertising expense (specific to individual segments) Net income $46,000 $125,000 $100,000 (41,000) (11,000) 73,000 (10,000) (9,000) $ (8,500) 54.000 37,500 (36,500) (6,500) 3,000 (10,000) (1,500) (42,500) (10,000) 47,500 (10,000)