The president of Eaglesway Incorporated attended a seminar about the contribution margin model and returned to her company full of
enthusiasm about it She requested that last year's traditional model income statement be revised, and she recelved the following
report:
The president was told that the fixed expenses of $ included $ that had been split evenly between divisions because
they were general corporate expenses. After looking at the statement, the president exclaimed, "I knew it Division Y is a drag on the
whole company. Close it down!"
Required:
a Evaluate the president's remark.
b Calculate what the company's net income would be if Division Y were closed down.
c What is the policy statement related to the allocation of fixed expenses?
Complete this question by entering your answers in the tabs below.
Evaluate the president's remark.
