Question

Munoz Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated.

MUNOZ COMPANY
Income Statements for Year 2
Segment A B C
Sales $ 163,000 $252,000 $249,000
Cost of goods sold (129,000) (90,000) (84,000)
Sales commissions (22,000) (25,000) (28,000)
Contribution margin 12,000 137,000 137,000
General fixed operating expenses (allocation of president’s salary) (37,000) (49,000) (38,000)
Advertising expense (specific to individual divisions. (3,000) (17,000) 0
Net income (loss) $(28,000) $71,000 $99,000

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.

Answer 1

Answer:??

Step-by-step explanation:

Answer 2

To prepare a schedule of sales and costs for Segment A, consider the relevant figures such as revenues and expenses. To compare income statements, calculate the net income for each alternative: retaining or eliminating Segment A.

Step-by-step explanation:

To prepare a schedule of relevant sales and costs for Segment A, we need to consider only the revenues and costs associated with this segment:

• Sales: $163,000
• Cost of goods sold: $129,000
• Sales commissions: $22,000
• General fixed operating expenses (allocation of president's salary): $37,000
• Advertising expense: $3,000

To compare the income statements for the company as a whole under two alternatives, we need to calculate the net income (loss) for each alternative:

• Retaining Segment A: Net income = $(28,000) + $71,000 + $99,000 = $142,000
• Eliminating Segment A: Net income = $71,000 + $99,000 = $170,000