Question

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		$315		$1,780
Less: Variable expenses		1,115		45		252		1,412
Contribution margin		$165		$140		$63		$368
Less direct fixed expenses:
	Depreciation	50		15		13		78
	Salaries	95		85		80		260
Segment margin		$20		$40		$(30)		$30

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

Answer 1