Answered step by step
Verified Expert Solution
Question
1 Approved Answer
ASAP * Question 2 Ribeiro Manufacturing Company has four operating divisions. During the first quarter of 2020, the company reported aggregate income from operations of
ASAP
* Question 2 Ribeiro Manufacturing Company has four operating divisions. During the first quarter of 2020, the company reported aggregate income from operations of $128,600 and the following divisional results: Division I II III IV Sales $512,100 $395,300 $311,600 $175,300 Cost of goods sold 297,900 249,000 273,400 154,200 Selling and administrative expenses 68,300 79,500 68,600 74,800 Income (loss) from operations $145,900 $66,800 $(30,400) $(53,700) The analysis reveals the following percentages of variable costs in each division: II III IV 68% 91% 75% 91% Cost of goods sold Selling and administrative expenses 41 49 65 70 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 (III and IV). The consensus is that the company should discontinue one or both of these divisions. Calculate the contribution margin for divisions III and IV. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Divisions III Divisions IV Contribution margin $ $ Prepare an incremental analysis for the possible discontinuance of (1) division III and (2) division IV. (Round answers to 0 decimal places, e.g. 125. Enter all negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) (1) Division III Income Increase (Decrease) Division III: Keep Div. III Shut Div. III Contribution margin Fixed costs Totals $ (2) Division IV Income Increase (Decrease) Division IV: Keep Div. IV Shut Div. IV Contribution margin Fixed costs Totals $ What course of action do you recommend for each division? Division III should be Division IV should be Prepare a condensed income statement in columns for Ribeiro Manufacturing, assuming division IV is eliminated. Use the CVP format. Division IV's unavoidable fixed costs are allocated equally to the continuing divisions. (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) RIBEIRO MANUFACTURING COMPANY CVP Income Statement Div I Div II Div III Total $ $ Reconcile the total income from operations of $128,600 with the total income from operations without division IV. Income from operations with Division IV $ Incremental income from eliminating Division IV Income from operations without Division IV $Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started