Molina Medical Supply Company is trying to decide whether or not to continue distributing hospital supplies. The following information is available for Molina%u2019s business segments. Assume that all direct fixed costs could be avoided if a segment is dropped and that the total common fixed costs would remain unchanged if a segment is dropped.
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Hospital Supplies
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Retail Stores
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Mail Order
|
|
Sales
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$120,000
|
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$440,000
|
|
$360,000
|
|
|
Variable costs
|
64,000
|
|
200,000
|
|
140,000
|
|
|
Contribution Margin
|
56,000
|
|
240,000
|
|
220,000
|
|
|
Direct Fixed Costs
|
50,000
|
|
80,000
|
|
90,000
|
|
|
Allocated common fixed costs
|
20,000
|
|
70,000
|
|
60,000
|
|
|
Net Income
|
($ 14,000)
|
|
$ 90,000
|
|
$ 70,000
|