(c) Prepare a columnar condensed income statement for Wayne Manufacturing, assum
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Question
(c) Prepare a columnar condensed income statement for Wayne Manufacturing, assuming the division(s) that should be eliminated are eliminated. Use the CVP format. Remember: Closed division's unavoidable fixed costs are allocated equally to the continuing divisions. (See Illustrations 20-16 and 20-17 for guidance, if needed.)
Consider the following information regarding Wayne Manufacturing Company and the following instructions. This is similar to Problems 20-5A and 20-5B in our textbook. Wayne Manufacturing Company has four operating divisions. During the first quarter of 2016, the company reported the divisional results shown below and aggregate income shown below. Division: North South East West Aggregate Income Sales $ 368,072 $ 281,467 $ 223,730 $ 129,908 Cost of goods sold 216,513 180,428 194,862 108,257 Selling and administrative expenses 43,303 57,737 46,912 50,520 Income (loss) from operations $ 108,257 $ 43,303 $ (18,043) $ (28,868) $ 104,649 Analysis reveals the following percentages of variable costs in each division. Division: North South East West Cost of goods sold 70% 80% 75% 90% Selling and administrative expenses 40% 50% 65% 70% 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 (East and West). Consensus is that one or both of the divisions should be discontinued. Instructions - Your solutions should be clearly labeled on Solutions of this workbook. (a) Compute the contribution margin for the East and West Divisions. (See illustration 20-17 for guidance, if needed.) (b) Prepare an incremental analysis concerning the possible discontinuance of (1) East Division and (2) West Division. What course of action do you recommend for each division? Should either be closed? (See illustration 20-18 for guidance, if needed.)(c) Prepare a columnar condensed income statement for Wayne Manufacturing, assuming the division(s) that should be eliminated are eliminated. Use the CVP format. Remember: Closed division's unavoidable fixed costs are allocated equally to the continuing divisions. (See Illustrations 20-16 and 20-17 for guidance, if needed.)
Sign in Cu nked Cell 1-1 the following ifoinregding Wayne Munufcturing Cornpuny and the foilowing instructions. This is siilor to 20-5A and 20-5 in r texthaok. Wayne Manufacturina Company has four operatings divisions. Durine the first quarter of 2016, the company reported the divisional results showri below and a 9 guregale incotrie shown below DivisinNort South Cost of goods sold Selling and administrative expenses Income (lass) frorn oper alionis 268,07281,467 223,73129,908 108,257 50,520 180,428 T,737 108,25743,303 216,513 43,303 16,912 18,043)$ 28,86BS 104,649 16 Analysls reveals the following percentages of varlable costs In each division. 17 19 19 DivisiNorth South West 70% 75% Cost ol gocds sold Sclling and administratvc cpenses 21 of any division would save 5C% uf Lhe fixed custs nd expenses for lhal division. Top manapement is very concerned about the unprofitable divisions (East and West. Consensus is that one or both of the divisions Your solutions should be clearly labeled on Solutions of this workbook. 25 i(a) Compute the contribution marPin for the East and west Divisions. (See ustroton 2U-1/forquidonce, if needed., b Preparc an incremental analysis concerning the possibla discontinuance of (1) East Divslon and (2 West Division. What coursc of 26 laction do you recommend for each division? should elther be closed? (See Mustrotion 20-18 for auidonce, If needed. c Prepare a celurnnar condensed income staternent for Wayne Manufacturing assuming the division(s) that should be elirninated are Use the CVP forrnat. Reer: Cl divisian's unavaidaile tixed costs are allocated equally to the cntinuing divisians. 2stotions 2016 nd 20 12 forquidanc, fneeded Problem & Instructin Solutiens Sheet3Explanation / Answer
(a)
(b)(1) Incremental Analysis for discontinuance of East Division:
(b)(2) Incremental Analysis for discontinuance of West Division:
Working:
The West Division should be closed since there would be an incremental income of $15878 by its discontinuance while the East Division on the other hand should not be closed since its discontinuance would result in an incremental loss of $14524.
(c)
Division: East West Sales 223730 129908 Less: Variable costs Cost of goods sold 146147 97431 Selling and administrative expenses 30493 35364 Total variable costs 176639 132795 Contribution margin $ 47091 -2887Related Questions
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