Question
Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given...
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 | $285 | $1,750 | |||||
| Less: Variable expenses | 1,115 | 45 | 228 | 1,388 | |||||
| Contribution margin | $165 | $140 | $57 | $362 | |||||
| Less direct fixed expenses: | |||||||||
| Depreciation | 50 | 15 | 9 | 74 | |||||
| Salaries | 95 | 85 | 108 | 288 | |||||
| Segment margin | $20 | $40 | $(60) | $0 | |||||
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 be eliminated 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".
Increase $___________
Should Petoskey keep or drop Conway?
Drop
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