incremental analysis Hendrix has four operating divisions. During the first quar
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incremental analysis
Hendrix has four operating divisions. During the first quarter of 2018, the company reported the divisional results shown below and aggregate income shown below.
Insert Pege Layout Formul Data Revie vi Tell me what you want to do Cit Calibri Paste. EeCopy . Blu-1,la-A- 1 Format Painter Menge & Center . | $ . % , 1 £2 | Conditional Format as Cell Insert Formatting Table Styles- Clipboard Font Alignment Styles 166 Consider the following information regarding Hendrix Industries, LLC and the folowing instructions. This is similar to Problems 20-54 and 20-58 in our textbook. Hendrix has four operating divisions. During the first quarter of 2018, the company reported the divisional results shown below and 9 aggregate income shown below. Aggregate Division: North America South America Europe Asia Income Sales Cost of goods sold Selling and administrative expense Income (loss) from operations 217,185 S 58,551 $ (42.901) (43,922) S $ 708,688 $511,413 408,302247,294 198,502 92,714 408,801 82,702 346,093 106,769 362,209 88,994 188,913 .5 6 Analysis reveals the following percentages of variable costs in each division. Division: North America South America Cost of goods sold Selling and administrative expense 72.5% 41.0% 82.0% 48.0% Europe 770% 63.0% Asia 89.0% 67.5% 0 1 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 (Europe and Asia). Consensus is that one or both of the 2 divisions should be discontinued. 4 instructions- Your solutions should be clearly labeled on Solutions of this workbook Problem &Instructions; Solutions Sheet3Explanation / Answer
ans 1 Division: Europe Asia Sales $408,302 $247,294 Variable cost Cost of goods sold (362209*77%),(198502*89%) 278901 176667 Variable Selling & administrative expenses (88994*63%), (92714*67.5%) 56066 62582 Total variable cost 334967 239249 Contribution Margin $73,335 $8,045 If rounded to two decimal $73,334.85 $8,045.27 ans 2 Europe Continue Eliminate Net Income Increase/(decrease) Contribution Margin $73,335 ($73,335) Fixed cost (avoidable) Cost of goods sold 83308 41654 -41654 (362209*23%) (83308*50%) Selling and administrative expenses 32927.78 16464 -16464 (88994*37%) Total Fixed cost 116236 58118 -58118 Income/(loss) from operations) ($42,901) ($58,118) ($15,217) Asia Continue Eliminate Net Income Increase/(decrease) Contribution Margin $8,045 ($8,045) Fixed cost (avoidable) Cost of goods sold 21835 10918 -10918 (198502*11%) (21835*50%) Selling and administrative expenses 30132 15066 -15066 (92714*32.5%) Total Fixed cost 51967 25984 -25984 Income/(loss) from operations) ($43,922) ($25,984) $17,938 Asia division should be discontinued ans 3 ans 1 Division: North America South america Europe Total Sales 708688 $511,413 $408,302 1628403 Cost of goods sold 296381 283796 278901 859078 (408801*72.5%) (346093*82%) Selling and administrative expenses 33908 51249 56066 141223 (82702*41%) (106769*48%) Total variable cost 330289 335045 334967 1000301 Contribution Margin $378,399 $176,368 $73,335 628102 Fixed cost Cost of goods sold 116060 65936 86947 268943 Selling and administrative expenses 53816 60542 37950 152308 Total Fixed cost 169876 126478 124897 421251 Income/(loss) from operations) $208,524 $49,890 ($51,562) $206,851 working North South East Fixed cost Cost of goods sold 112420 62297 83308 (408801*27.5%) (346093*18%) Cost of goods sold Asia DIVISION (10918*1/3) 3639 3639 3639 Total 116060 65936 86947 Selling and administrative expenses 48794 55520 32928 (82702*59%) (106769*52%) Selling and administrative expenses 5022 5022 5022 (15066*1/3) Total 53816 60542 37950
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