Patterson 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
(2) The elimination of SegmentA.

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PATTERSON COMPANY Income Statements for the Year 2014 Segment Sales Cost of goods sold Sales commissions Contribution margin General fixed oper. exp. (allocation of president's salary) (44,000) (52,000) (44,000) Advertising expense (specific to individual divisions)(3000 10,000) 0 Net income $165,000 $%240,000 $250,000 121,000 (92,000) 95,000) 15,000 22,000 (22,000) 126,000 133,00 $ (18,000 64,000 89,000