Trent Weaver was reviewing the latest income statement for Taryn Enterprises. For the second year in a row, the Collectibles division was showing a negative segment margin, and Trent thought it was time to close the division to increase the company's operating income. The income statement that he examined follows.

When Trent broke the news, Taylor Tatum, manager of the Collectibles division, was upset.
Taylor thought that Trent could be making a snap judgment, and suggested that he look at the division's detailed operating results. The Collectibles division is composed of two groups, Sports Memorabilia and Coins and Stamps. Sports Memorabilia accounts for 60% of the division's sales and contribution margin; Coins and Stamps accounts for the other 40%. Sports Memorabilia's traceable fixed costs are $810,000; Coins and Stamps, $245,000.

Required
a. Prepare a segment margin income statement for the Collectibles division that shows the segment margin of each group.
b. Should Trent Weaver close the Collectibles Division? Why or whynot?

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Promotions Division Collectibles Division Total Sales revenue Less variable expenses Contribution margin Less traceable fixed expenses Segment margin Common fixed costs Net operating income $2,860,000 1,645,000 1,215,000 1,275,000 $ (60,000) $8,160,000 5,295,000 2,865,000 2,218,000 647,000 555,000 $ 92,000 $5,300,000 3,650,000 943,000 707,000