When Mr. Ding L. Berry, president and chief executive of Berry, Inc., first saw

Question

When Mr. Ding L. Berry, president and chief executive of Berry, Inc., first saw the segmented income statement below, he flew into his usual rage: %u201CWhen will we ever start showing a real profit? I%u2019m starting immediate steps to eliminate those two unprofitable lines!%u201D

These traceable expenses could be eliminated if the product lines to which they are traced were discontinued.

Prepare a segmented income report, without the allocation of common fixed expenses. (Input all expenses as positive values except negative amounts which should be indicated by a minus sign. Omit the "$" sign in your response.)

Product Lines Total U V W   Sales $ 255,000 $ 102,000 $ 78,000 $ 75,000   Variable expenses 116,000 33,000 35,000 48,000   Contribution margin 139,000 69,000 43,000 27,000   Traceable fixed expenses* 97,000 26,000 33,000 38,000   Common expenses, allocated 32,200 15,000 12,500 4,700   Net operating income (loss) $ 9,800 $ 28,000 $ (2,500 ) $ (15,700 )

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

Part B:

Segment W can be discontinued as it is resulting in a loss of 11000.

Thanks.

Total U V W Sales 255000 102000 78000 75000 Variable Expenses 116000 33000 35000 48000 Contribution Margin 139000 69000 43000 27000 Traceable Fixed Expenses 97000 26000 33000 38000 Segment Margin 42000 43000 10000 -11000 Common Expenses Allocated 32200


Net Operating Income (Loss) 9800

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