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Brislin 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
Brislin 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 goods 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.
Prepare a columnar condensed income statement for Brislin Company, assuming Division II is eliminated. Division II's unavoidable fixed costs are allocated equally to the continuing divisions. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) BRISLIN COMPANY CVP Income Statement For the Quarter Ended March 31, 2020 Divisions IV Total Sales 250000 500000 450000 1200000 Variable costs Cost of goods sold 200000 300000 250000 750000 Selling and administrative 75000 60000 50000 185000 Total variable costs 7200 7200 7200 21600 Contribution margin 32200 132800 142800 243400 Fixed costs Cost of goods sold 19200 Selling and administrative 24000 Total fixed costs 43200 Income (loss) from operationsStep by Step Solution
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