Question

Zachary Company operates three segments. Income statements for the segments imply that profitability could be improved if Segme A were eliminated. ZACHARY COMPANY Income Statements for the Year 2018 Segment Sales Cost of goods sold Sales commissions Contribution margin General fixed operating expenses (allocation of president's salary) Advertising expense (specific to individual divisions) Net income $ 166,000 (128,000) (18,000) 20,000 (41,000) (7.000) $ (28,000) $247,000 (76,000) (23,000) 148,000 (50,000) (20,000) $ 78,000 $253,000 (84,000) 25,000) 144,000 (34,000) $110,000 Required a. Prepare a schedule of relevant sales and costs for Segment A b. Prepare comparative income statements for the company as a whole under two alternatives: (1) the retention of Segment A and (2) the elimination of Segment A Complete this question by entering your answers in the tabs below. Required A Required B Prepare a schedule of relevant sales and costs for Segment A. Relevant Rev. and Cost items for Segment A Effect on income Rogured A Required B >

Answer 1

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a.	Relevant Rev. And Cost item for segment A
	Sales	$   1,66,000
	Cost of goods sold	$ -1,28,000
	Sales Commission	$     -18,000
	Advertising expense	$       -7,000
	Net Income	$      13,000
b.		Keep Segment A	Eliminating Segment A
	Sales	$   6,66,000	$     5,00,000
	Cost of goods sold	$ -2,88,000	$   -1,60,000
	Sales Commission	$     -66,000	$       -48,000
	Contribution margin	$   3,12,000	$     2,92,000
	General fixed operating expenses	$ -1,25,000	$   -1,25,000
	Advertising expense	$     -27,000	$       -20,000
	Net Income	$   1,60,000	$     1,47,000
	Workings:	A	B	C	Retaining Segment A	Eliminating Segment A
		(i)	(ii)	(iii)	(i) + (ii) + (iii)	(ii) + (iii)
	Sales	$   1,66,000	$     2,47,000	$            2,53,000	$   6,66,000	$   5,00,000
	Cost of goods sold	$ -1,28,000	$       -76,000	$              -84,000	$ -2,88,000	$ -1,60,000
	Sales Commission	$     -18,000	$       -23,000	$              -25,000	$     -66,000	$     -48,000
	Contribution margin	$      20,000	$     1,48,000	$            1,44,000	$   3,12,000	$   2,92,000
	General fixed operating expenses	$     -41,000	$       -50,000	$              -34,000	$ -1,25,000	$ -1,25,000	(It will fully charged)
	Advertising expense	$       -7,000	$       -20,000	$                         -	$     -27,000	$     -20,000
	Net Income	$     -28,000	$         78,000	$            1,10,000	$   1,60,000	$   1,47,000