Question

Problem 20-05A a, b1-b3, c (Part Level Submission)

Brislin Company has four operating divisions. During the first quarter of 2020, the company reported aggregate income from operations of $212,000 and the following divisional results.

Division

IIIIIIIV

Sales$246,000$195,000$498,000$452,000

Cost of goods sold198,000192,000304,000247,000

Selling and administrative expenses77,00054,00056,00051,000

Income (loss) from operations$ (29,000)$ (51,000)$138,000$154,000

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

IIIIIIIV

Cost of goods sold73%92%77%79%

Selling and administrative expenses41604862

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)

Your answer is correct.

  

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 IDivision II

Contribution margin$$

Click if you would like to Show Work for this question:

Open Show Work

SHOW SOLUTION

LINK TO TEXT

Attempts: 2 of 2 used

(b1)

Prepare an incremental analysis concerning the possible discontinuance of Division I. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

ContinueEliminateNet Income
Increase (Decrease)

Contribution margin$$$

Fixed costs

   Cost of goods sold

   Selling and administrative

      Total fixed expenses

Income (loss) from operations$$$

Click if you would like to Show Work for this question:

Open Show Work

Answer 1

	Division I	Division II	Division III	Division IV
Sales	246,000	195,000	498,000	452,000
COGS	198,000	192,000	304,000	247,000
Selling and Admin Expenses	77,000	54,000	56,000	51,000
Income	-29,000	-51,000	138,000	154,000
Variable cost %
COGS	73%	92%	77%	79%
Selling and Admin Expenses	41%	60%	48%	62%
Contribution Margin = Sales - Variable costs
	Division I	Division II
Sales	246,000	195,000
Less: Variable costs
COGS	144,540	176,640
Selling and Admin Expenses	31,570	32,400
Contribution Margin	69,890	-14,040
Incremental Analysis
	Keep Division I	Shut	Income Increase
Contribution Margin	69,890	0	-69,890
Fixed costs
Cost of Goods sold	53,460	26,730	26,730
Selling and Admin Expenses	45,430	22,715	22,715
Total Fixed expenses	98,890	49,445	49,445
Income(loss) from Operations	-29,000	-49,445	-20,445

Use negative sign for costs, if it does not accept positive