Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows:

Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on the equipment is dedicated to the product lines. None of the equipment can be sold. Also, each of the three products has a different supervisor whose position would be eliminated if the associated product were dropped.

Required:
Estimate the impact on profit that would result from dropping Conway. Explain why Petoskey should keep or dropConway.

Transcribed Image Text:

Conway Total Boyne $185 $140 Alanson Sales revenue Less: Variable expenses $1,280 1,115 $ 165 $300 225 $ 75 $1,765 1,385 $ 380 Contribution margin Less direct fixed expenses: Depreciation Salaries 50 95 $ 20 85 S 40 10 80 $(15) 75 260 $ 45 Segment margin