University Hospital provided the following income statement for two of its divisions: Diagnostic and Outpatient.

The CEO of the hospital is not pleased with the division's performance,and he believes that the Diagnostic division is responsible for its dismal result and wants to consider outsourcing diagnostic procedures.

Required:

The controller has determined that the hospital’s headquarters allocated $98,000 and $32,000 in common administrative fixed costs, respectively, to Diagnostic and Outpatient divisions. Prepare a segment margin income statement that will provide the CEO with a better basis for evaluating the two divisions’ performance.

Question

University Hospital provided the following income statement for two of its divisions: Diagnostic and Outpatient. 
  
The CEO of the hospital is not pleased with the division's performance,and he believes that the Diagnostic division is responsible for its dismal result and wants to consider outsourcing diagnostic procedures.

Required:

The controller has determined that the hospital’s headquarters allocated $98,000 and $32,000 in common administrative fixed costs, respectively, to Diagnostic and Outpatient divisions.  Prepare a segment margin income statement that will provide the CEO with a better basis for evaluating the two divisions’ performance.

Quizplus · Accepted Answer

The Answer of University Hospital provided the following income statement for two of its divisions: Diagnostic and Outpatient. 
  
The CEO of the hospital is not pleased with the division's performance,and he believes that the Diagnostic division is responsible for its dismal result and wants to consider outsourcing diagnostic procedures.

Required:

The controller has determined that the hospital’s headquarters allocated $98,000 and $32,000 in common administrative fixed costs, respectively, to Diagnostic and Outpatient divisions.  Prepare a segment margin income statement that will provide the CEO with a better basis for evaluating the two divisions’ performance.

University Hospital Provided the Following Income Statement for Two of Its