1 ACC 3020 Fall 2016 2 Excel Case #2-Incremental Analysis Enter your name Enter your WSU Access ID: Consider the following information regarding Wayne Manufacturing Company and the following instructions. This is similar to Problems 20-5A and 20-58 in 7 our textbook. Wayne Manufacturing Company has four operating divisions. During the first quarter of 2016, the company reported the divisional results shown below and 9 aggregate income shown below Aggregate 10 East 561,000 Sales Cost of goods sold Selling and administrative expenses Income (loss) from operations 330,000 66,000 165,000 $ 429,000341,000 297,000 71,500 198,000 165,000 77,000 44,000) 159,500 275,000 12 13 88,000 66,000$ 27,500 S 15 16 Analysis reveals the following percentages of variable costs in each division. 17 18 19 South East West Cost of goods sold Selling and administrative expenses 75% 65% e 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. 23 24 25 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 26 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 llustrations 20-16 and 20-17 for guidance, if needed.) 27 28 61 63 65 Problem & Instructions Solutions Sheet3 +