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 $207,400 and the following divisional results DIvision Sales Cost of goods sold Selling and administrative expenses Income (loss) from operations $249,000 $200,000 $498,000 $446,000 192,000 305,000 248,000 45,000 $ (27,600) $(52,000) $134,000 $153,000 205,000 71,600 60,000 59,000 Analysis reveals the following percentages of variable costs in each division. IV 74 % 59 Cost of goods sold 68 % 88 % 81% Selling and administrative expenses 40 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 59 47 divisions should be discontinued (a) Your answer is correct. Compute the contribution margin for Divisions I and II. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Division I Division II Contribution margin 80,960 (4,360)

Explanation / Answer

Giving the correction of wrong part here, that is fixed cost calculation in last part:

Fixed costs:

Cost of good sold(1)

$69,440

(205000×32%+3840)

$61,790

(305000×19%+3840)

$68,320

(248,000×26%+3840)

$199,550

$47,060

(71600×.6+4100)

$35,370

(59000×53%+4100)

$22,550

(45000×41%+4100)

Total fixed expenses

Income (loss) from operation

$116,500

(35,540)

$97,160

$126,060

$90870

$145,060

$304,530

$235,580

(1) division fixed cost of good sold plus 1/3 of division 2 unavoidable fixed cost of good sold

Division 2 unavoidable fixed cost of good sold={(192000×12%×50%=11520 )/3 }

=$ 3840 for each division

2)

division fixed selling and administrative expense plus 1/3 of division 2 unavoidable fixed selling and administrative expense

Division 2 unavoidable fixed selling and administrative expense={($60000×41%×50% =$12,300)/3 }

=$4100 for each division

Division 1 division 3 division 4 total Contribution margin 80,960 $223,220 $235,930 $540,110 Fixed costs:

Cost of good sold(1)

$69,440

(205000×32%+3840)

$61,790

(305000×19%+3840)

$68,320

(248,000×26%+3840)

$199,550

Selling and administrative(2)

$47,060

(71600×.6+4100)

$35,370

(59000×53%+4100)

$22,550

(45000×41%+4100)

$104,980

Total fixed expenses

Income (loss) from operation

$116,500

(35,540)

$97,160

$126,060

$90870

$145,060

$304,530

$235,580

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