Required:

a. By how much would companywide income increase or decrease if West Division is eliminated? Should West Division be eliminated? 

b. Assume that West Division is able to increase its revenue to $760,000 by raising its prices. Determine the amount of the increase or decrease that would occur in companywide net income if the segment were eliminated. Should West Division be eliminated if revenue were $690,000? 

c. What is the minimum amount of revenue required to justify continuing the operation of West Division?

Transcribed Image Text:

Rundle Transport Company divides its operations into four divisions. A recent income statement for its West Division follows. RUNDLE TRANSIORT COMPANY Nest Division Income Statement for Year 3 $ 620,000 (470,000) (62,000) (82,000) (52,000) (142,000) $(188, 000) Revenue Salarien for drivers Fuel expenses Insurance Division-level facility-sustaining conts Companywide tacility-sustaining costs Net loes Rundle Transport Company divides its operations into four divisions. A recent income statement for its West Division follows. RUNDLE TRANSIORT COMPANY Nest Division Income Statement for Year 3 $ 620,000 (470,000) (62,000) (82,000) (52,000) (142,000) $(188, 000) Revenue Salarien for drivers Fuel expenses Insurance Division-level facility-sustaining conts Companywide tacility-sustaining costs Net loes

Answer rating: 100% (QA)

Solution A Financial advantage Disadvantage on eliminating West ... View the full answer