FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
Bartleby Related Questions Icon

Related questions

bartleby

Concept explainers

Question
Monty Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $218,700 and the following divisional results.

    Division  
    I   II   III   IV  
Sales   $253,000   $195,000   $501,000   $447,000  
Cost of goods sold   197,000   194,000   296,000   250,000  
Selling and administrative expenses   69,300   62,000   61,000   48,000  
Income (loss) from operations   $ (13,300)   $ (61,000)   $144,000   $149,000  

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

    I     II     III     IV    
Cost of goods sold   72 %   89 %   79 %   76 %  
Selling and administrative expenses   40     57     52     59    

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.
 
 
 
 
 
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   $
 
  $
 
 
 
 

LINK TO TEXT
 
 
 
Prepare an incremental analysis concerning the possible discontinuance of Division I. (Round answers to 0 decimal places, e.g. 1525. If amount decreases net income then enter the amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

    Continue   Eliminate   Net Income
Increase (Decrease)
 
Contribution margin   $
 
  $
 
  $
 
 
Fixed costs              
   Cost of goods sold  
 
 
 
 
 
 
   Selling and administrative  
 
 
 
 
 
 
      Total fixed expenses  
 
 
 
 
 
 
Income (loss) from operations   $
 
  $
 
  $
 
 
 
 

LINK TO TEXT
 
 
 
Prepare an incremental analysis concerning the possible discontinuance of Division II. (Round answers to 0 decimal places, e.g. 1525. If amount decreases net income then enter the amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

    Continue   Eliminate   Net Income
Increase (Decrease)
 
Contribution margin   $
 
  $
 
  $
 
 
Fixed costs              
   Cost of goods sold  
 
 
 
 
 
 
   Selling and administrative  
 
 
 
 
 
 
      Total fixed expenses  
 
 
 
 
 
 
Income (loss) from operations   $
 
  $
 
  $
 
 
 
 

LINK TO TEXT
 
 
 
What course of action do you recommend for each division?

Division I  
 EliminatedContinued
 
Division II  
 ContinuedEliminated
Expert Solution
Check Mark
Knowledge Booster
Background pattern image
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education