Anderson Publishing has two divisions: Book Publishing and Magazine Publishing. The Magazine division has been losing money for the last five years and Anderson is considering eliminating that division. Andersons information about the two divisions is as follows:
Book Division Magazine Division Total
Sales Revenue $ $ $
Cost of Goods sold
Variable manufacturing costs
Fixed manufacturing costs
Gross Profit $ $ $
Operating Expenses
Variable operating expenses
Fixed operating expenses
Net income $ $ $
Only percent of the fixed manufacturing costs and percent of the fixed operating expenses are directly attributable to each division. The remaining are common or shared between the two divisions.
Required:
Compute the contribution margin and the segment margin of each division and the company as a whole.
What will be the impact on net income if the Magazine Division is eliminated?
