(a) Open Show Work LINK TO TEXT (b1) Open Show Work Brislin Company has four ope
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Brislin Company has four operating divisions. During the first quarter of 2020, the company reported aggregate income from operations of $204,000 and the following divisional results.Division I II III IV Sales $250,000 $198,000 $499,000 $446,000 Cost of goods sold 198,000 192,000 298,000 254,000 Selling and administrative expenses 75,000 63,000 63,000 46,000 Income (loss) from operations $ (23,000) $ (57,000) $138,000 $146,000
Analysis reveals the following percentages of variable costs in each division.
I II III IV Cost of goods sold 69 % 90 % 80 % 74 % Selling and administrative expenses 41 62 52 58
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
Continue Eliminate Net Income Increase (Decrease) Contribution margin 82630 0 -82630 Fixed costs: Cost of goods sold 61380 30690 30690 Selling and administrative 44250 22125 22125 Total fixed expenses 105630 52815 52815 Income (loss) from operations -23000 -52815 -29815
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