Segmented contribution income statements


Rockwell Company owns a single restaurant which has a cantina primarily used to seat patrons while they wait on their tables. The company is considering eliminating the cantina and adding more dining tables. Segmented contribution income statements are as follows and fixed costs applicable to both segments are allocated on the basis of sales.

 

Restaurant

Cantina

Total

Sales

$800,000

$200,000

$1,000,000

Variable costs

475,000

160,000

635,000

Direct fixed costs

50,000

15,000

65,000

Allocated fixed costs

212,500

37,500

250,000

Net Income

$ 62,500

($12,500)

$50,000

What financial effect will occur to profit if Rockwell eliminates the cantina but no more dining customers are served?

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Finance Basics: Segmented contribution income statements
Reference No:- TGS0551144

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