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Ben Blum recently graduated from Moonshadow University's accounting program. He has been hired as an analyst by Primrose Tire Company and one of his first
Ben Blum recently graduated from Moonshadow University's accounting program. He has been hired as an analyst by Primrose Tire Company and one of his first assigned tasks was to evaluate the North East division of Primrose. This division has been heavily focused on producing a special snow and mud tire. Sales of the special tire have been disappointing and management is now evaluating whether to eliminate the North East division Ben performed the following analysis and is preparing to address the Board of Directors of Primrose with his recommendation that the North East division should be eliminated, resulting in an increase to total company profit of $49,000 All Other North Total $3,528,400 Sales Revenue Cost of goods sold Gross profit Operating expenses Net operating income (loss) Divisions 1.957.040 53.000 1055 880 96000 1151880 $3,328,400 S200,000 47.000 The North East division's cost of goods sold includes $33,000 in foxed costs and operating expenses include $46,000 in fixed costs. None of the fixed costs will be eliminated if the North East division is discontinued. Required: Based on the data given, complete the following table using incremental analysis (Loss amounts should be indicated by a minus sign.) Not ContinueEliminated Increase Sales Variable COGS Variable Operating Expenses Contribution Margin Fked COGS Fked Operating Expenses Net Operating Income (Loss) 46,000 46,000 Based on your calculation should North East division eliminated? O Yes O No
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