The management accountant for the Katy Market prepared the following segmented income statement for...

Question

The management accountant for the Katy Market prepared the following segmented income statement for the most current year.
Question:
The management accountant for the Katy Market prepared the following segmented income statement for the most current year.


Grocery	Bakery	Produce	Fish/Meat	Total
Sales	$130,000	$120,000	$80,000	$70,000	$270,000
Variable expenses	60,000	75,000	45,000	25,000	$205,000
Contribution margin	70,000	45,000	35,000	45,000	$195,000
Other costs	22,000	24,000	25,000	21,000	$92,000
Segment margin	48,000	21,000	10,000	24,000	$103,000
Allocated avoidable costs	6,000	3,000	4,000	5,000	$18,000
Segment income	42,000	18,000	6,000	19,000	$85,000
Allocated corporate costs	13,000	12,000	9,000	7,000	$41,000
Corporate profit	$29,000	$6,000	($3,000)	$12,000	$44,000

(Required)
a) Katy Market is thinking of dropping Produce because it is reporting an operating loss. Assuming the company drops "Produce" and does not replace it, operating income for the firm will:
b) Assuming that "Produce" is discontinued and the space formerly devoted to this line is used for "Grocery", operating income for the company will:
c) Assuming that "Produce" is discontinued and the space formerly devoted to this line is rented for $4,000 per year, operating income for the company will:
Solution:
Answer a)

Grocery	Bakery	Produce	Fish/Meat	Total
Sales	$130,000	$120,000	$80,000	$70,000	$270,000
Variable expenses	60,000	75,000	45,000	25,000	$205,000
Contribution margin	70,000	45,000	35,000	45,000	$195,000	160,000
Other costs	22,000	24,000	25,000	21,000	$92,000	67,000
Segment margin	48,000	21,000	10,000	24,000	$103,000	93,000
Allocated avoidable costs	6,000	3,000	4,000	5,000	$18,000	18,000
Drops "Produce" and does not replace it, operating income for the firm will:	75,000

Answer b)

Segment margin when produce is moved to grocery

71,390

21,000

24,000

116,390

($18,000)

98,390

Answer c) = 79000

005_7yciazo-fj5qrip4.docx

David · Accepted Answer

Question: 
The management accountant for the Katy Market prepared the following segmented income 
statement for the most current year.
 
Grocery Bakery Produce Fish/Meat Total 
Sales $130,000 $120,000 $80,000 $70,000 $270,000 
Variable expenses 60,000 75,000 45,000 25,000 $205,000 
Contribution margin 70,000 45,000 35,000 45,000 $195,000 
Other costs 22,000 24,000 25,000 21,000 $92,000 
Segment margin 48,000 21,000 10,000 24,000 $103,000 
Allocated avoidable costs 6,000 3,000 4,000 5,000 $18,000 
Segment income 42,000 18,000 6,000 19,000 $85,

The management accountant for the Katy Market prepared the following segmented income statement for the most current year. Question: The management accountant for the Katy Market prepared the...

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