Anderson Publishing has two divisions: Book Publishing & Magazine Publishing. The Magazine division has been losing money for the last 5 years and Anderson is considering eliminating that division. Anderson’s information about the two divisions is as follows: Book Division Magazine Division TotalSales Revenue$7,800,000 $3,300,000 $11,100,000 Cost of Goods sold Variable costs 2,000,000 997,000 2,997,000 Fixed costs 1,077,500 1,200,000 2,277,500 Gross Profit$4,722,500 $1,103,000 $5,825,500 Operating Expenses Variable 135,000 198,000 333,000 Fixed 2,916,000 1,189,000 4,105,000 Net income$1,671,500 $(284,000) $1,387,500 Only 20 percent of the fixed manufacturing costs and 60 percent of the fixed operating expenses are directly attribute to each division. The remainder are common or shared between the two divisions. Required:1. Present the financial information in the form of a segmented income statement (using the contribution margin approach). 2. What will be the impact on net income if the Magazine Division is eliminated? MagazineDivisionBook DivisionTotalVariable costsDirect fixed costsCommon fixed costsNet income (loss)

Calculation of direct fixed cost & common fixed cost : Particulars Book Division Magazine…

Answered: Anderson Publishing has two divisions:…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter6: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 3DQ: Describe how total fixed costs and unit fixed costs behave with changes in the level of activity.

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Anderson Publishing has two divisions: Book Publishing & Magazine Publishing. The Magazine division has been losing money for the last 5 years and Anderson is considering eliminating that division. Anderson’s information about the two divisions is as follows:

	Book Division		Magazine Division	Total
Sales Revenue	$	7,800,000		$	3,300,000		$	11,100,000
Cost of Goods sold
Variable costs		2,000,000			997,000			2,997,000
Fixed costs		1,077,500			1,200,000			2,277,500
Gross Profit	$	4,722,500		$	1,103,000		$	5,825,500
Operating Expenses
Variable		135,000			198,000			333,000
Fixed		2,916,000			1,189,000			4,105,000
Net income	$	1,671,500		$	(284,000	)	$	1,387,500

Only 20 percent of the fixed manufacturing costs and 60 percent of the fixed operating expenses are directly attribute to each division. The remainder are common or shared between the two divisions.

Required:

1. Present the financial information in the form of a segmented income statement (using the contribution margin approach).

2. What will be the impact on net income if the Magazine Division is eliminated?

Magazine
Division
Book Division
Total
Variable costs
Direct fixed costs
Common fixed costs
Net income (loss)

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