Mason Transport Company divides its operations into four divisions. A recent income statement for its West Division follows.
a. By how much would companywide income increase or decrease if West Division is eliminated?
b. Assume that West Division is able to increase its revenue to $750,000 by raising its prices. Determine the amount of the increase or decrease that would occur in companywide net income.
c. What is the minimum amount of revenue required to justify continuing the operation of West Division?
Solution
a. Increase or Decrease in Companywide Income:
So, the Company wide Income will Increase by $58,000 if West Division is Eliminated.
b. Increase or Decrease in Company Wide Net Income:
Increase in Revenue: 750,000 - 660,000 = $90,000
Increase in Company Wide Net Income: Increase in Revenue
Increase in Company Wide Net Income: $90,000
c. The Minimum amount of Revenue Required to Justify continuing the Operation of West Division:
Total Cost of West Division: $718,000
This is the Minimum Amount Required to Continue the Operation.
.
Measures of Central Tendency: Mean, Median and Mode
Mason Transport Company divides its operations into four divisions- A (1).docx
1. Mason Transport Company divides its operations into four divisions. A recent income statement
for its West Division follows.
a. By how much would companywide income increase or decrease if West Division is
eliminated?
b. Assume that West Division is able to increase its revenue to $750,000 by raising its prices.
Determine the amount of the increase or decrease that would occur in companywide net income.
c. What is the minimum amount of revenue required to justify continuing the operation of West
Division?
Mason Transport Company divides its operations into four divisions. A recent income statement
for its West Division follows.
Solution
a. Increase or Decrease in Companywide Income:
So, the Company wide Income will Increase by $58,000 if West Division is Eliminated.
b. Increase or Decrease in Company Wide Net Income:
Increase in Revenue: 750,000 - 660,000 = $90,000
Increase in Company Wide Net Income: Increase in Revenue
Increase in Company Wide Net Income: $90,000
c. The Minimum amount of Revenue Required to Justify continuing the Operation of West
Division:
Total Cost of West Division: $718,000
This is the Minimum Amount Required to Continue the Operation.
2. Amount($)
Revenue 660,000
- Salaries for Driver (510,000)
- Fuel Expenses (66,000)
- Insurance (86,000)
- Division Level Facility Sustaining Cost (56,000)
Net Loss (58,000)
