Structuring a Keep-or-Drop Product-Line Problem with
Complementary Effects
Shown below is a segmented income statement for...
Structuring a Keep-or-Drop Product-Line Problem with
Complementary Effects
Shown below is a segmented income statement for Mullett Marina’s
three main boating service lines:
Winter
Storage
Boat Fuel &
Concessions
Boat
Maintenance
Total
Sales revenue
$4,000,000
$1,000,000
$5,000,000
$10,000,000
Less: Variable expenses
2,000,000
200,000
4,900,000
7,100,000
Contribution margin
$2,000,000
$ 800,000
$ 100,000
$2,900,000
Less direct fixed expenses:
Garage/warehouse rent
700,000
55,000
350,000
1,105,000
Supervision
50,000
70,000
150,000
270,000
Equipment depreciation
250,000
75,000
100,000
425,000
Segment margin
$1,000,000
$ 600,000
$...
Keep-or-Drop for Service Firm, Complementary Effects,
Traditional Analysis
Devern Assurance Company provides both property and automobile...
Keep-or-Drop for Service Firm, Complementary Effects,
Traditional Analysis
Devern Assurance Company provides both property and automobile
insurance. The projected income statements for the two products are
as follows:
Property
Insurance
Automobile
Insurance
Sales
$4,200,000
$12,000,000
Less variable expenses
3,830,000
9,600,000
Contribution margin
$370,000
$2,400,000
Less direct fixed expenses
400,000
500,000
Segment margin
$(30,000)
$1,900,000
Less common fixed expenses (allocated)
100,000
200,000
Operating income (loss)
$(130,000)
$1,700,000
The president of the company is considering dropping the
property insurance. However, some policyholders...
Keep-or-Drop Decision
Petoskey Company produces three products: Alanson, Boyne, and
Conway. A segmented income statement, with...
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
$420
$1,885
Less: Variable expenses
1,115
45
315
1,475
Contribution margin
$165
$140
$105
$410
Less direct fixed expenses:
Depreciation
50
15
15
80
Salaries
95
85
116
296
Segment margin
$20
$40
$(26)
$34
Direct fixed expenses consist of depreciation and plant
supervisory salaries. All depreciation on the equipment is...
Structuring a Keep-or-Drop Product Line Problem with
Complementary Effects
Shown below is a segmented income statement...
Structuring a Keep-or-Drop Product Line Problem with
Complementary Effects
Shown below is a segmented income statement for Hickory
Company's three wooden flooring product lines:
Strip
Plank
Parquet
Total
Sales revenue
$400,000
$200,000
$300,000
$900,000
Less: Variable expenses
225,000
120,000
250,000
595,000
Contribution margin
$175,000
$ 80,000
$ 50,000
$305,000
Less direct fixed expenses:
Machine rent
(5,000)
(20,000)
(30,000)
(55,000)
Supervision
(15,000)
(10,000)
(5,000)
(30,000)
Depreciation
(35,000)
(10,000)
(25,000)
(70,000)
Segment margin
$120,000
$ 40,000
$ (10,000)
$150,000
Hickory's management is...
Structuring a Keep-or-Drop Product Line Problem with
Complementary Effects
Shown below is a segmented income statement...
Structuring a Keep-or-Drop Product Line Problem with
Complementary Effects
Shown below is a segmented income statement for Hickory
Company's three wooden flooring product lines:
Strip
Plank
Parquet
Total
Sales revenue
$400,000
$200,000
$300,000
$900,000
Less: Variable expenses
225,000
120,000
250,000
595,000
Contribution margin
$175,000
$ 80,000
$ 50,000
$305,000
Less direct fixed expenses:
Machine rent
(5,000)
(20,000)
(30,000)
(55,000)
Supervision
(15,000)
(10,000)
(5,000)
(30,000)
Depreciation
(35,000)
(10,000)
(25,000)
(70,000)
Segment margin
$120,000
$ 40,000
$ (10,000)
$150,000
Hickory's management is...
Structuring a Keep-or-Drop Product Line Problem with
Complementary Effects
Shown below is a segmented income statement...
Structuring a Keep-or-Drop Product Line Problem with
Complementary Effects
Shown below is a segmented income statement for Hickory
Company's three wooden flooring product lines:
Strip
Plank
Parquet
Total
Sales revenue
$400,000
$200,000
$300,000
$900,000
Less: Variable expenses
225,000
120,000
250,000
595,000
Contribution margin
$175,000
$ 80,000
$ 50,000
$305,000
Less direct fixed expenses:
Machine rent
(5,000)
(20,000)
(50,000)
(75,000)
Supervision
(15,000)
(10,000)
(20,000)
(45,000)
Depreciation
(35,000)
(10,000)
(25,000)
(70,000)
Segment margin
$120,000
$ 40,000
$ (45,000)
$115,000
Hickory's management is...
Structuring a Keep-or-Drop Product Line Problem with
Complementary Effects
Shown below is a segmented income statement...
Structuring a Keep-or-Drop Product Line Problem with
Complementary Effects
Shown below is a segmented income statement for Hickory
Company's three wooden flooring product lines:
Strip
Plank
Parquet
Total
Sales revenue
$400,000
$200,000
$300,000
$900,000
Less: Variable expenses
225,000
120,000
250,000
595,000
Contribution margin
$175,000
$ 80,000
$ 50,000
$305,000
Less direct fixed expenses:
Machine rent
(5,000)
(20,000)
(30,000)
(55,000)
Supervision
(15,000)
(10,000)
(5,000)
(30,000)
Depreciation
(35,000)
(10,000)
(25,000)
(70,000)
Segment margin
$120,000
$ 40,000
$ (10,000)
$150,000
Hickory's management is...
Structuring a
Keep-or-Drop Product Line Problem with Complementary Effects
Shown below is a
segmented income statement...
Structuring a
Keep-or-Drop Product Line Problem with Complementary Effects
Shown below is a
segmented income statement for Hickory Company's three wooden
flooring product lines:
Strip
Plank
Parquet
Total
Sales revenue
$400,000
$200,000
$300,000
$900,000
Less: Variable expenses
225,000
120,000
250,000
595,000
Contribution margin
$175,000
$ 80,000
$ 50,000
$305,000
Less direct fixed expenses:
Machine rent
(5,000)
(20,000)
(30,000)
(55,000)
Supervision
(15,000)
(10,000)
(5,000)
(30,000)
Depreciation
(35,000)
(10,000)
(25,000)
(70,000)
Segment margin
$120,000
$ 40,000
$ (10,000)
$150,000
Hickory's management
is...
Structuring a Keep-or-Drop Product Line Problem with
Complementary Effects
Shown below is a segmented income statement...
Structuring a Keep-or-Drop Product Line Problem with
Complementary Effects
Shown below is a segmented income statement for Hickory
Company's three wooden flooring product lines:
Strip
Plank
Parquet
Total
Sales revenue
$400,000
$200,000
$300,000
$900,000
Less: Variable expenses
225,000
120,000
250,000
595,000
Contribution margin
$175,000
$ 80,000
$ 50,000
$305,000
Less direct fixed expenses:
Machine rent
(5,000)
(20,000)
(30,000)
(55,000)
Supervision
(15,000)
(10,000)
(5,000)
(30,000)
Depreciation
(35,000)
(10,000)
(25,000)
(70,000)
Segment margin
$120,000
$ 40,000
$ (10,000)
$150,000
Hickory's management is...