Ainsley Corporation has four operating divisions. The budgeted revenues and expenses for each division for 2017 follows Click to view the results of each division) Closing down any division would result in savings of 40% of the fixed costs of that division Top management is very concerned about the unprofitable divisions (A and B) and is considering closing them for the year Read the requirements Requirement 1. Calculate the increase or decrease in operating income if Ainsley closes division A. Begin by calculating Division A's contribution margin Division A Sales Contribution margin Now, calculate the fixed costs that will be saved by closing division A Fixed costs Division A Fixed cost of goods sold Fixed selling, general, and administrative expenses Total fixed costs Fixed costs saved by shutting down division Would operating income increase or decrease? By how much? Does Division A's contribution margin cover its avoidable fixed costs? Requirement 2. Calculate the increase or decrease in operating income if Ainsley closes division B Begin by calculating division B's contribution margin Division B Sales Choose from any list or enter any number in the input Tields and then continue to the next question Save for later Ainsley Corporation has four operating divisions. The budgeted revenues and expenses for each division for 2017 follows: Click to view the results of each division) Closing down any division would result in savings of 40% of the fixed costs of that division Top management is very concerned about the unprofitable divisions (A and B) and is considering closing them for the year. Read the requirements Does Division A's contribution margin cover its avoidable fixed costs? Requirement 2. Calculate the increase or decrease in operating income if Ainsley closes division B Begin by calculating division B's contribution margin. Division B Sales Contribution margin Now.calculate the foced costs that will be saved by closing division Division B Fixed Costs Fixed cost of goods sold Fixed selling general, and administrative expenses Total fixed costs Fixed costs saved by shutting down division Would operating income increase or decrease? By how much? Does Division A's contribution margin cover its avoidable fixed costs? Requirement 3. What other factors should the top management of Ainsley consider before making a decision? O A. Management should consider the role that the divisions product line plays relative to other product lines OB. Management should consider the impact on the morale of the remaining employees if the division(s) are closed C. Both of the above OD. Neither of the above management should make this decision relying only on financial data Choose from any list or enter any number in the input fields and then continue to the next question Save to Late i Data Table Sal Division Con NOW $ Sales Cost of goods sold Selling, general, and administrative expenses B C D 504.000 $ 948.000 $ 960.000 $ 1.240,000 440.000 930.000 765.000 925 000 96.000 202 500 144.000 210.000 (32.000) $ 184,500) $ 51.000 $ 105.000 Fixe Fixe exp Operating income/loss Total Fix Wo ded Further analysis of costs reveals the following percentages of variable costs in each division Division A B D Cost of goods sold 90 % 80 96 90 % 85 % Selling, general, and administrative expenses 50% 50 % 609 60 % By Dog cov Red Print Done Begin by calculating division B's contribution margin Sales Division B Begin by Division A Sales Contribution marg 6 Requirements Now, calculate the Fixed cost of good Fixed selling, gen expenses Total fixed costs 1. Calculate the increase or decrease in operating income if Ainsley closes division A 2. Calculate the increase or decrease in operating income if Ainsley closes division B 3. What other factors should the top management of Ainsley consider before making a decision? Fixed costs saved Print Done Would operating i decrease? By how much? Does Division A's contribution margin cover its avoidable fixed costs? Requirement 2. Calculate the increase or decrease in operating income if Ainsley closes division B Begin by calculating division B's contribution margin
