Keep-or-Drop Decision Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement,...
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Accounting
Keep-or-Drop Decision
Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows:
Alanson
Boyne
Conway
Total
Sales revenue
$1,280
$185
$330
$1,795
Less: Variable expenses
1,115
45
215
1,375
Contribution margin
$165
$140
$115
$420
Less direct fixed expenses:
Depreciation
50
15
12
77
Salaries
95
85
116
296
Segment margin
$20
$40
$(13)
$47
Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on the equipment is dedicated to the product lines. None of the equipment can be sold.
Assume that each of the three products has a different supervisor whose position would remain if the associated product were dropped.
Required:
CONCEPTUAL CONNECTION: Estimate the impact on profit that would result from dropping Conway. Enter amount in full, rather than in thousands. For example, "15000" rather than "15". Decrease $_______
Should Petoskey keep or drop Conway? Keep
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