Brislin Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $213,000 and the following divisional results.
Analysis reveals the following percentages of variable costs in each division.
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.
Instructions
(a) Compute the contribution margin for Divisions I and II.
(b) Prepare an incremental analysis concerning the possible discontinuance of (1) Division 1 and (2) Division II. What course of action do you recommend for each division?
(c) Prepare a columnar condensed income statement for Brislin Company, assuming Division II is eliminated. (Use the CVP format.) Division II’s unavoidable fixed costs are allocated equally to the continuing divisions.
(d) Reconcile the total income from operations ($213,000) with the total income from operations without Division II.
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Managerial Accounting: Tools for Business Decision Making
- Crane, Inc. has three divisions: Bud, Wise, and Er. The results of operations for May, 2022 are presented below. Units sold Revenue Less variable costs Less direct fixed costs Less allocated fixed costs Net income Bud 2,700 $63,000 28,800 12,600 5,400 $16,200 Wise 4,500 $45,000 23,400 17,100 9,000 $(4,500) Er 1,800 $36,000 14,400 10,800 3,600 $7,200 Total 9,000 $144,000 66,600 40,500 18,000 $18,900 All of the allocated costs will continue even if a division is discontinued. Crane allocates indirect fixed costs based on the number of units to be sold. Since the Wise division has a net loss, Crane is concerned that it should be discontinued. Crane thinks that if the division is closed, that sales at the Bud division will increase by 12% while sales at the Er division will stay the same.arrow_forwardWingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) $ 1,600,000 700,400 899,600 990,000 $ (90,400) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: Sales Variable expenses as a percentage of sales. Traceable fixed expenses East $ 440,000 $ 280,000 52% Division Central $ 620,000 $ 320,000 36% West $ 540,000 46% $ 195,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $21,000 based on the belief that it would increase that division's sales by 15%. Assuming these estimates are accurate, how much…arrow_forwardWingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales $ 1,610,000 Variable expenses 659,000 Contribution margin 951,000 Fixed expenses 1,046,000 Net operating income (loss) $ (95,000) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: Division East Central West Sales $ 430,000 $ 610,000 $ 570,000 Variable expenses as a percentage of sales 52 % 34 % 40 % Traceable fixed expenses $ 288,000 $ 321,000 $ 193,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $29,000 based on the belief that it would…arrow_forward
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