Question

Brislin Company has four operating divisions. During the first quarter of 2020, the company reported aggregate income from operations of $193,000 and the following divisional results.

		Division
		I		II		III		IV
Sales		$250,000		$198,000		$496,000		$443,000
Cost of goods sold		205,000		189,000		297,000		255,000
Selling and administrative expenses		70,000		63,000		61,000		54,000
Income (loss) from operations		$ (25,000)		$ (54,000)		$138,000		$134,000

Analysis reveals the following percentages of variable costs in each division.

		I			II			III			IV
Cost of goods sold		69	%		89	%		80	%		74	%
Selling and administrative expenses		37			61			51			58

Discontinuance of any division would save 50% of the fixed costs and expenses for that division.

Top management is very concerned about the unprofitable divisions (I and II). Consensus is that one or both of the divisions should be discontinued.

(a)

Compute the contribution margin for Divisions I and II. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Division I		Division II
Contribution margin		$		$

b

) Prepare an incremental analysis concerning the possible discontinuance of Division I. (Round answers to 0 decimal places, e.g. 1525. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

C)Prepare an incremental analysis concerning the possible discontinuance of Division II. (Round answers to 0 decimal places, e.g. 1525. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

D) Prepare a columnar condensed income statement for Brislin Company, assuming Division II is eliminated. Division II’s unavoidable fixed costs are allocated equally to the continuing divisions. (Round answers to 0 decimal places, e.g. 1525. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Answer 1