Aeris Company has four operating divisions. During the first quarter of 2020, the company reported
aggregate income from operations of $213,000 and the following divisional results.
			Division
			I	II	III	IV
Sales			$250,000	$200,000	$500,000	$450,000
Cost of goods sold			200,000	192,000	300,000	250,000
Selling and administrative expenses			75,000	60,000	60,000	50,000
Income (loss) from operations			($25,000)	($52,000)	$140,000	$150,000
Analysis reveals the following percentages of variable costs in each division.
			I	II	III	IV
Cost of good sold			70%	90%	80%	75%
Selling and administrative expenses			40	60	50	60
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.
Instructions
(a)	Compute the contribution margin for Division I and II.
(b)	Prepare an incremental analysis concerning the possible discontinuance of (1) Division I and
	(2) Division II. What course of action do you recommend for each division?
(c )	Prepare a columnar condensed income statement for Aeris Company, assuming Division II
	is eliminated. (Use the CVP format.) Division II's unavoidable fixed costs are allocated equally
	to the continuing divisions.
(d)	Reconcile the total income from operations ($213,000) with the total income from operations
	without Division II.