Answer:
PETOSKEY COMPANY
INCOME STATEMENT - Keeping Conway
Alanson Boyne Conway Total
Sales $1,280,000 $185,000 $300,000 $1,765,000
Variable expenses ( 1,115,000) (45,000) (225,000) (1,385,000)
Contribution 165,000 140,000 75,000 380,000
direct fixed cost
Depreciation (50,000) (15,000) (10,000) (75,000)
Salaries (95,000) (85,000) (80,000) (260,000)
Segment Margin 20,000 40,000 (15,000) 45,000
INCOME STATEMENT - Dropping Conway
Alanson Boyne Total
Sales $1,280,000 $185,000 $1,465,000
Variable expenses ( 1,115,000) (45,000) (1,160,000)
Contribution 165,000 140,000 305,000
Depreciation (75,000)
Salaries (260,000)
net income ( 30,000)
Decision: Product Conway should not be dropped because it has positive contribution and since depreciation charge and supervisor salaries remians. Dropping of Conway will lead to negative profit for the whole company
Step-by-step explanation: