Exercises Questions

Question 9.1 (Total: 20 marks)

1When Rosana, CFO of Hydie Inc., first evaluated the segmented income statement below, he flew into his usual rage: "When are we having losses in our product lines, I would rather eliminate them."

	Product Lines
	Total	U	V	W
Sales	$250,000	$100,000	$75,000	$75,000
Variable expenses	$119,000	$37,500	$35,000	$47,000
Contribution margin	$130,500	$62,500	$40,000	$28,000
Traceable fixed expenses*	$98,000	$31,000	$37,000	$30,000
Common expenses, allocated	$32,900	$18,000	$10,500	$4,400
Operating income (loss)	-$400	$13,500	$(7,500)	$(6,400)

*These traceable expenses could be eliminated if the product lines to which they are traced were discontinued. Required: Recommend which segments, if any, should be eliminated. Prepare a report in good form to support your answer.Show all the necessary calculations.