Problem 26-4A LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT Problem 26-4A

Question

Problem 26-4A

LINK TO TEXT

LINK TO TEXT

LINK TO TEXT

LINK TO TEXT

Problem 26-4A

Brislin Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $212,400 and the following divisional results.
Division I II III IV Sales $250,000 $199,000 $498,000 $449,000 Cost of goods sold 204,000 191,000 295,000 247,000 Selling and administrative expenses 74,600 63,000 60,000 49,000 Income (loss) from operations $ (28,600) $ (55,000) $143,000 $153,000
Analysis reveals the following percentages of variable costs in each division.
I II III IV Cost of goods sold 72 % 88 % 80 % 76 % Selling and administrative expenses 40 60 51 61
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.

Explanation / Answer

Answer 1.

Sales

2. For Division I

3. For Division II

If eliminated, Division I will incurr more loss, therefore it should be continued whereas Division II's loss will reduce if eliminated, therefore it should be eliminated.

4.

I II III IV

Sales

250,000 199,000 498,000 449,000 Cost of goods sold - Variable 146,880 168,080 236,000 187,720 Selling & Admin Exp- Variable 29,840 37,800 30,600 29,890 Contribution 73,280 -6,880 231,400 231,390 Cost of goods sold- Fixed 57,120 22,920 59,000 59,280 Selling & Admin Exp- FIxed 44,760 25,200 29,400 19,110 Income/loss from operations -28,600 -55000 143,000 153,000 Contribution margin(Contri/Sales) 29.31% -3.46% 46.46% 51.53%

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.