A segment of a company reports the following loss for the year. All $140,000 of...
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Accounting
A segment of a company reports the following loss for the year. All $140,000 of its variable costs are avoidable, and $75,000 of its fixed costs are avoidable.
Segment Income (Loss)
Sales
$ 200,000
Variable costs
140,000
Contribution margin
60,000
Fixed costs
80,000
Income (loss)
(20,000)
(a) Compute the income increase or decrease from eliminating this segment. (b) Should the segment be eliminated?
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Required A
Required B
Compute the income increase or decrease from eliminating this segment.
Segment Elimination Analysis
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Eliminate
Income Increase (Decrease)
Sales
$200,000
Variable costs
140,000
Contribution margin
60,000
Fixed costs
80,000
Income (loss)
$(20,000)
Required B
Should the segment be eliminated?
Should the segment be eliminated?
Answer & Explanation
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