Question: Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows:
Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on the equipment is dedicated to the product lines. None of the equipment can be sold.
Keep-or-Drop Decision Refer to the information for Petoskey Company on the previous page. Assume that each of the three products has a different supervisor whose position would remain if the associated product were dropped.
Required: Conceptual Connection: Estimate the impact on profit that would result from dropping Conway. Explain why Petoskey should keep or drop Conway.