Rundle Transport Company divides its operations into four divisions. A recent income statement for its West Division follows. RUNDLE TRANSPORT COMPANYWest DivisionIncome Statement for Year 3Revenue$620,000 Salaries for drivers (470,000)Fuel expenses (62,000)Insurance (82,000)Division-level facility-sustaining costs (52,000)Companywide facility-sustaining costs (142,000)Net loss$(188,000) RequiredBy how much would companywide income increase or decrease if West Division is eliminated? Should West Division be eliminated?Assume that West Division is able to increase its revenue to $690,000 by raising its prices. Determine the amount of the increase or decrease that would occur in companywide net income if the segment were eliminated. Should West Division be eliminated if revenue were $690,000?What is the minimum amount of revenue required to justify continuing the operation of West Division?

Requirements:-1 Computation of how much would companywide income increase or decrease if West…

Answered: Rundle Transport Company divides its…

Managerial Accounting

15th Edition

ISBN:9781337912020

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

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

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 13E: The condensed income statement for the Consumer Products Division of Tri-State Industries Inc. is as...

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Question

Rundle Transport Company divides its operations into four divisions. A recent income statement for its West Division follows.

RUNDLE TRANSPORT COMPANY
West Division
Income Statement for Year 3
Revenue	$	620,000
Salaries for drivers		(470,000	)
Fuel expenses		(62,000	)
Insurance		(82,000	)
Division-level facility-sustaining costs		(52,000	)
Companywide facility-sustaining costs		(142,000	)
Net loss	$	(188,000	)

Required

By how much would companywide income increase or decrease if West Division is eliminated? Should West Division be eliminated?
Assume that West Division is able to increase its revenue to $690,000 by raising its prices. Determine the amount of the increase or decrease that would occur in companywide net income if the segment were eliminated. Should West Division be eliminated if revenue were $690,000?
What is the minimum amount of revenue required to justify continuing the operation of West Division?

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