7-5

Sheffield Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $205,000 and the following divisional results.

Sheffield Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $205,000 and the following divisional results. Dlvlslon I II III IV Sales $247,000 $198,000 $501,000 $448,000 Cost of goods sold 200,000 190,000 298,000 254,000 Selling and administrative 75,000 64,000 63,000 45,000 expenses Income (loss) from operations (28 0003; (56 0003)5 351401000 $149.000 I I Analysis reveals the following percentages of variable costs in each division. I II III IV Cost of goods sold 67 % 88 % 81 % 78 % Selling and administrative 38 57 50 57 expenses 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. v (3) Compute the contribution margin for Divisions I and II. 1 Division I Division II Contribution $ margin $