P2 and P4 from Chapter 23 and P2 and P5 from Chapter 24
Decision to Discontinue Segment
P 2. Seven months ago, Naib Publishing Company published its first book (Book N). Since then, the
company has added four more books to its product list (Books S, Q, X, and H). Management is
considering proposals for three more new books, but editorial capacity limits the company to pro-
ducing only seven books annually. Before deciding which of the proposed books to publish, management
wants you to evaluate the performance of its existing book list. Recent revenue and cost data appear
Projected data for the proposed new books are Book P, sales, $450,000, contribution margin, $45,000;
Book T, sales, $725,000, contribution margin, ($25,200); and Book R, sales, $913,200, contribution
margin, $115,500. Projected direct fixed costs are: Book P, $5,000; Book T, $6,000; Book R, $40,000.
1. Analyze the performance of the five books currently being published.
2. Manager Insight: Should the company eliminate any of its present products? If so, which one(s)?
3. Manager Insight: Identify the new books you would use to replace those eliminated. Justify your
Net Present Value Method
P 4. Sonja and Sons, Inc., owns and operates a group of apartment buildings. Management wants to sell
one of its older four-family buildings and buy a new structure. The old building, which was purchased 25