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
		I		II		III		IV
Sales		$246,000		$195,000		$498,000		$452,000
Cost of goods sold		198,000		192,000		304,000		247,000
Selling and administrative expenses		77,000		54,000		56,000		51,000
Income (loss) from operations		$ (29,000)		$ (51,000)		$138,000		$154,000

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

		I			II			III			IV
Cost of goods sold		73	%		92	%		77	%		79	%
Selling and administrative expenses		41			60			48			62

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.

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. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

BRISLIN COMPANY
CVP Income Statement
For the Quarter Ended March 31, 2020
		Divisions
		I		III		IV		Total
Sales		$		$		$		$
Variable costs
Cost of goods sold
Selling and administrative
Total variable costs
Contribution margin
Fixed costs
Cost of goods sold
Selling and administrative
Total fixed costs
Income (loss) from operations		$		$		$		$

Answer 1

BRISLIN COMPANY
CVP Income Statement
For the Quarter Ended March 31, 2020
	Divisions
	I	III	IV	Total
Sales	246,000	498,000	452,000	1,196,000
Variable costs				-
Cost of goods sold (Refer Note 1)	144,540	234,080	195,130	573,750
Selling and administrative (Refer Note 2)	31,570	26,880	31,620	90,070
Total variable costs	176,110	260,960	226,750	663,820
Contribution margin	69,890	237,040	225,250	532,180
Fixed costs				-
Cost of goods sold (Refer Note 3)	56,020	72,480	54,430	1,82,930
Selling and administrative (Refer Note 4)	49,030	32,720	22,980	1,04,730
Total fixed costs	105,050	105,200	77,410	287,660
Income (loss) from operations	-35,160	131,840	147,840	244,520
Note 1: Computation of fixed and variable cost of goods sold
	Divisions
	I	II	III	IV
Cost of goods sold	198000	192000	304000	247000
Variable cost in %	73%	92%	77%	79%
Variable cost in $	144540	176640	234080	195130
Fixed Cost in $	53460	15360	69920	51870
Note 2: Computation of fixed and variable selling and administrative expenses
	Divisions
	I	II	III	IV
Selling and administrative expenses	77000	54000	56000	51000
Variable cost in %	41%	60%	48%	62%
Variable cost in $	31570	32400	26880	31620
Fixed Cost in $	45430	21600	29120	19380
Note 3: Computation of fixed portion of cost of goods sold
	Divisions
	I	II	III	IV
Fixed cost of goods sold	53460	15360	69920	51870
Less: Avoidable portion of the fixed cost of goods sold (50% of Division II)		7680
Add/(Less): Allocation of Division II's unavoidable fixed cost of goods sold equally to Division I, III and IV	2560	(7680)	2560	2560
Total fixed cost of goods sold	56020	0	72480	54430
Note 4: Computation of fixed portion of selling and administrative expenses
	Divisions
	I	II	III	IV
Fixed selling and administrative expenses	45430	21600	29120	19380
Less: Avoidable portion of the fixed cost of goods sold (50% of Division II)		10800
Add/(Less): Allocation of Division II's unavoidable fixed cost of goods sold equally to Division I, III and IV	3600	(10800)	3600	3600
Total fixed cost of goods sold	49030	0	32720	22980