Charles, controller for Sunland Manufacturing Company, has prepared the following financial information for the most recent period showing profitability of its three divisions:
Appliance
Electronics Furniture
Sales
$110,000 $116,000 $128,000
Variable expenses
91,000
97,000 119,000
Contribution margin
19,000
19,000
9,000
Fixed expenses:
Factory insurance
1,800
2,200
3.000
Depreciation
2,800
3,400
4,400
Advertising
1,400
1,400
1,400
Utilities
1,600
1,800
2,000
Total fixed expenses
7,600
8,800
10,800
Operating income
$11,400
$10,200
($1,800)
The factory insurance and advertising assigned to the furniture division are avoidable if the division is discontinued. Depreciation will remain unchanged if a division is dropped. Discontinuing furniture will reduce the utilities by $1,600.
(a)
Prepare an analysis showing whether Furniture should be eliminated. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Sunland Manufacturing Company
Profitability Analysis
Less direct fixed expenses:
Utilities
$
Advertising
Depreciation
Segment Margin
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$
$
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