Answer:
Profit will reduce by $28,000
Explanation:
The impact on profit that would result from dropping Conway is shown below:-
Alanson Boyne Conway Total
Sales revenue $1,024,000 $185,000 - $1,209,000
($1,280,000 × 80%)
Less
Variable expenses $892,000 $45,000 - $937,000
($1,115,000 × 80%)
Contribution margin$132,000 $140,000 $ - $272,000
Less:
Direct fixed expenses
Depreciation $50,000 $15,000 $10,000 $75,000
Salaries $95,000 $85,000 $ - $180,000
Segment margin ($13,000) $40,000 ($10,000) $17,000
Existing Profit $45,000
Profit will reduce by $28,000
