Marinette Company makes several products, including canoes. The company has been experiencing losses from its canoe segment and is considering dropping that product line. The following information is available regarding its canoe segment. Should management discontinue the manufacturing of canoes? Support your decision. Exercise 23-13 Income analysis of eliminating departments A1 Check Income impact if canoe segment dropped, $(175,000) MARINETTE COMPANY Income Statement—Canoe Segment Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,000,000 Variable costs Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $450,000 Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 Variable overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000 Variable selling and administrative . . . . . . . . . . . . . . . . . . . 200,000 Total variable costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,450,000 Contribution margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 550,000 Fixed costs Direct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375,000 Indirect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000 Total fixed costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675,000 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (125,000)
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