Estimate impact on profit that would result from dropping

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Question - 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

$300

$1,765

Less: Variable expenses

1,115

45

240

1,400

Contribution margin

$165

$140

$60

$365

Less direct fixed expenses:

 

 

 

 

Depreciation

50

15

10

75

Salaries

95

85

100

280

Segment margin

$20

$40

$(50)

$10

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. Should Petoskey keep or drop Conway?

Reference no: EM132772533

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