Prepare comparative income statements for the company as a whole under two alternatives: (1) the retention of segment a and (2)

Question

TEA [102]

2 years ago

12

Prepare comparative income statements for the company as a whole under two alternatives: (1) the retention of segment a and (2)

the elimination of segment
a.

Business

1 answer:

trapecia [35] · Answer 1 · 2022-08-21T16:51:26+03:00

Answer:

There is no data given in the question, a similar question is attached with this answer and answer was made accordingly.

Comparative Statement is made in the MS Excel File which is attached with this answer, Please find it.

Explanation:

a.

All the items except the president salary are relevant to the segment A, because these costs are particularly for incurred for Seg. A. A a single unit the Segment A is making the profit of $11,000. Allocation of president salary is the major reason for the loss.

b.

Keeping Segment A makes is a more profitable decision than Eliminating the segment A. because share of president salary associated with segment A is allocated to other segments and Segment A was contributing $11,000 in the president salary at break-even. This contribution is lost when we Eliminate the Segment A.