Kimmel, Accounting, 6e NEXT Problem 20-5A (Part Level Submission) Brislin Compan
ID: 341604 • Letter: K
Question
Kimmel, Accounting, 6e NEXT 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 $218,700 and the following divisional results Division IV Sales Cost of goods sold Selling and administrative expenses Income (loss) from operations $253,000$195,000 $501,000 $447,000 197,000194,000296,000 250,000 62,000 61,000 48,000 s (13,300) (61,000) 144,000 $149,000 69,300 Analysis reveals the following percentages of variable costs in each division. III IV 72 % 79% 76% Cost of goods sold Selling and administrative expenses 40575259 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 89 % should be discontinued.Explanation / Answer
Computation of Fixed Cost of Goods Sold
I
II
III
IV
Total
Cost of Goods Sold
$ 197,000
$ 194,000
$ 296,000
$ 250,000
% of Variable Cost
72%
89%
79%
76%
Variable Cost
$ 141,840
$ 172,660
$ 233,840
$ 190,000
Fixed Cost
$ 55,160
$ 21,340
$ 62,160
$ 60,000
$ 198,660
Computation of Fixed selling and administrative expenses
I
II
III
IV
Total
Selling and administrative expenses
$ 69,300
$ 62,000
$ 61,000
$ 48,000
% of Variable Cost
40%
57%
52%
59%
Variable Cost
$ 27,720
$ 35,340
$ 31,720
$ 28,320
Fixed Cost
$ 41,580
$ 26,660
$ 29,280
$ 19,680
$ 117,200
Computation of Operating income by Continuing
I
II
III
IV
Total
Sales
$ 253,000
$ 195,000
$ 501,000
$ 447,000
$ 1,396,000
Less: Variable Cost
Cost of Goods Sold
$ 141,840
$ 172,660
$ 233,840
$ 190,000
$ 1,396,000
Selling and administrative expenses
$ 27,720
$ 35,340
$ 31,720
$ 28,320
$ 123,100
Total Variable Cost
$ 169,560
$ 208,000
$ 265,560
$ 218,320
$ 861,440
Contribution Margin
$ 83,440
$ (13,000)
$ 235,440
$ 228,680
$ 534,560
Less: Fixed Cost
$ -
$ -
$ -
$ -
$ -
Cost of Goods Sold
$ 55,160
$ 21,340
$ 62,160
$ 60,000
$ 198,660
Selling and administrative expenses
$ 41,580
$ 26,660
$ 29,280
$ 19,680
$ 117,200
Total Fixed Cost
$ 96,740
$ 48,000
$ 91,440
$ 79,680
$ 315,860
Income (loss) from operations
$ (13,300)
$ (61,000)
$ 144,000
$ 149,000
$ 218,700
Computation of Operating income by eliminating
I
II
III
IV
Total
Sales
$ 253,000
$ 501,000
$ 447,000
$ 1,201,000
Less: Variable Cost
Cost of Goods Sold
$ 141,840
$ 233,840
$ 190,000
$ 565,680
Selling and administrative expenses
$ 27,720
$ 31,720
$ 28,320
$ 87,760
Total Variable Cost
$ 169,560
$ 265,560
$ 218,320
$ 653,440
Contribution Margin
$ 547,560
Less: Fixed Cost
Cost of Goods Sold
$ 198,660
Selling and administrative expenses
$ 117,200
Total Fixed Cost
$ 315,860
Income (loss) from operations
$ 231,700
Continue
Eliminate
Contribution Margin
$ 534,560
$ 547,560
Fixed Costs
Cost of Goods Sold
$ 198,660
$ 198,660
Selling and administrative expenses
$ 117,200
$ 117,200
Total Fixed Expenses
$ 315,860
$ 315,860
Income (loss) from operations
$ 218,700
$ 231,700
Computation of Fixed Cost of Goods Sold
I
II
III
IV
Total
Cost of Goods Sold
$ 197,000
$ 194,000
$ 296,000
$ 250,000
% of Variable Cost
72%
89%
79%
76%
Variable Cost
$ 141,840
$ 172,660
$ 233,840
$ 190,000
Fixed Cost
$ 55,160
$ 21,340
$ 62,160
$ 60,000
$ 198,660
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