Keep-or-Drop Decision Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement,...
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Keep-or-Drop Decision
Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows:
Alanson Boyne Conway Total Sales revenue $1,280 $185 $435 $1,900 Less: Variable expenses 1,115 45 348 1,508 Contribution margin $165 $140 $87 $392 Less direct fixed expenses: Depreciation 50 15 14 79 Salaries 95 85 108 288 Segment margin $20 $40 $(35) $25
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.
Assume that each of the three products has a different supervisor whose position would be eliminated if the associated product were dropped.
Required:
Conceptual Connection: Estimate the impact on profit that would result from dropping Conway. Enter amount in full, rather than in thousands. For example, "15000" rather than "15". Increase or decrease by $
Should Petoskey keep or drop Conway?
Keep-or-Drop Decision
Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows:
| Alanson | Boyne | Conway | Total | ||||||
| Sales revenue | $1,280 | $185 | $435 | $1,900 | |||||
| Less: Variable expenses | 1,115 | 45 | 348 | 1,508 | |||||
| Contribution margin | $165 | $140 | $87 | $392 | |||||
| Less direct fixed expenses: | |||||||||
| Depreciation | 50 | 15 | 14 | 79 | |||||
| Salaries | 95 | 85 | 108 | 288 | |||||
| Segment margin | $20 | $40 | $(35) | $25 | |||||
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.
Assume that each of the three products has a different supervisor whose position would be eliminated if the associated product were dropped.
Required:
Conceptual Connection: Estimate the impact on profit that would result from dropping Conway. Enter amount in full, rather than in thousands. For example, "15000" rather than "15". Increase or decrease by $
Should Petoskey keep or drop Conway?
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