Question

Consider the following segmented income statement to answer the following questions: 1. What would be the...

Consider the following segmented income statement to answer the following questions:

1. What would be the common fixed costs for the company if Product A were was dropped (no longer produced)?

2. Assume that all direct fixed costs are salary costs. By how much will net income change if Product A is dropped? Enter your answer as a positive number regardless of whether you think income will increase or decrease.

Income Statement Product A Product B Total
Sales revenue 64000 110700 174700
Variable costs 18000 41000 59000
Contribution margin 46000 69700 115700
Direct Fixed costs 9200 13940 23140
Segment margin 36800 55760 92560
Common fixed costs 2560 4428 6988
Net income 34240 51332

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