The management accountant for Tony's Skateboard Company has prepared the following segmented income statement for each of its three product lines.

Required:
a. Do you recommend dropping the Cruise product line? Why or why not?
b. If the Jammer product line had been discontinued,the short-term effect on corporate profits would be a decrease of what amount?
c. Assume that the Flight product line has been discontinued and long-term capacity has had time to adjust.The projected long-term effect of this action on annual corporate profits would be a decrease of what amount?
d. Assume that an advertising campaign could increase revenues for any of the products by $15,000.To maximize corporate profits,which product line should receive the advertising dollars? Why?
e. How would you change the format of the segment margin statement above to make it more understandable?

Question

The management accountant for Tony's Skateboard Company has prepared the following segmented income statement for each of its three product lines.
  
Required:
a. Do you recommend dropping the Cruise product line? Why or why not?
b. If the Jammer product line had been discontinued,the short-term effect on corporate profits would be a decrease of what amount?
c. Assume that the Flight product line has been discontinued and long-term capacity has had time to adjust.The projected long-term effect of this action on annual corporate profits would be a decrease of what amount?
d. Assume that an advertising campaign could increase revenues for any of the products by $15,000.To maximize corporate profits,which product line should receive the advertising dollars? Why?
e. How would you change the format of the segment margin statement above to make it more understandable?

Quizplus · Accepted Answer

The Answer of The management accountant for Tony's Skateboard Company has prepared the following segmented income statement for each of its three product lines.
  
Required:
a. Do you recommend dropping the Cruise product line? Why or why not?
b. If the Jammer product line had been discontinued,the short-term effect on corporate profits would be a decrease of what amount?
c. Assume that the Flight product line has been discontinued and long-term capacity has had time to adjust.The projected long-term effect of this action on annual corporate profits would be a decrease of what amount?
d. Assume that an advertising campaign could increase revenues for any of the products by $15,000.To maximize corporate profits,which product line should receive the advertising dollars? Why?
e. How would you change the format of the segment margin statement above to make it more understandable?

The Management Accountant for Tony's Skateboard Company Has Prepared the Following