ABC, Inc, Is Segmented into Three Divisions and the Company Is

question 8

Essay

ABC, Inc., is segmented into three divisions and the company is concerned about the performance of Division Y.During your analysis of Division Y, you learn that $42,000 of the fixed expenses relate to general corporate expenses and had been allocated equally between the three divisions.
$\begin{array}{lcccc}&\text { Total Company } & \text { Division } \mathrm{X} & \text { Division } \mathrm{Y} & \text { Division } \mathrm{Z}\\ \text {Sales } &\$200,000&\$80,000&\$50,000&\$70,000\\ \text {Variable expenses } & \underline{120,000}& \underline{52,000}& \underline{30,000}& \underline{38,000}\\ \text { Contribution margin } &\$80,000&\$28,000&\$20,000&\$32,000\\ \text {Fixed expenses } & \underline{60,000}& \underline{20,000}& \underline{22,000}& \underline{18,000}\\ \text { Net income (loss) } & \underline{\$20,000}& \underline{\$8,000}& \underline{\$(2,000)}& \underline{\$14,000}\\ \text { } &\\\end{array}$
(a.)Calculate what the company's net income would be if Division Y were closed down.
(b.)Revise the income statement presented above into a more useful segmented income statement.

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