In: Accounting
Rock Inc. has three divisions, Granite, Lime and Nina. All fixed
costs are unavoidable. Following is the income statement for the
previous year:
Granite | Lime | Nina | Total | ||||||||||
Sales | $ | 513,000 | $ | 273,000 | $ | 226,000 | $ | 1,012,000 | |||||
Variable Costs | 186,000 | 124,200 | 100,200 | 410,400 | |||||||||
Contribution Margin | 327,000 | 148,800 | 125,800 | 601,600 | |||||||||
Fixed Costs (allocated) | 270,000 | 164,250 | 122,750 | 557,000 | |||||||||
Profit Margin | $ | 57,000 | $ | (15,450 | ) | $ | 3,050 | $ | 44,600 | ||||
a. What would Rock’s profit margin be if the Lime
division were dropped?
b. What would Rock’s profit margin be if the Nina
division were dropped?