Problem 20-5A (Part Level Submission) Brislin Company has four operating divisio

Question

Problem 20-5A (Part Level Submission)

Brislin Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $211,100 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.

Prepare an incremental analysis concerning the possible discontinuance of Division I. (Round answers to 0 decimal places, e.g. 1525. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

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 76,900 55,000 56,000 51,000 Income (loss) from operations $ (28,900) $ (52,000) $138,000 $154,000

Explanation / Answer

Division 1 Sales 246,000 Variable costs Cost of goods sold (198000*73%) 144540 Selling and administrative (76,900*41%) 31529 total variable expense 176069 contribution margin 69,931 continue Eliminate Net income inc (dec) Contribution margin 69,931 0 -69,931 Fixed costs Cost of goods sold (198000*27%) 53460 26730 26730 Selling and administrative (76900*59%) 45371 22686 22686 total fixed expenses 98831 49416 49416 income(loss)from operations -28900 -59316 -20516

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