Crane Company produces three versions of baseball bats: wood, aluminum, and hard
ID: 2561392 • Letter: C
Question
Crane Company produces three versions of baseball bats: wood, aluminum, and hard rubber. A condensed segmented income statement for a recent period follows: Total Sales Wood Aluminum Hard Rubber $540000 $230000 $65000 340000 170000 58000 $835000 Variable expenses 568000 Contribution margin 200000 60000 7000 267000 Fixed expenses 75000 35000 22000 132000 . Net income (loss) $125000 $ 25000 buy $(15000) $135000 Assume none of the fixed expenses for the hard rubber line are avoidable. What will be total net income if the line is dropped? $128000 $150000 $90000 $170000Explanation / Answer
Working note
1) Fixed cost given in the question are non avoidable costs i.e. these costs are shared between these segments. If one segment is closed then other segment will bear the fixed costs between them.
Net income if Hard rubber line is dropped
Line should not be dropped.
Particulars amount Total contribution from wood segment $200000 Total contribution from aluminium segment $60000 Total contribution $260000 Fixed cost ($75000+$35000+$22000) $132000 Net Income $128000