Question
Brislin Company has four operating divisions. During the first quarter of 2020, the company reported aggregate income from operations of $216,400 and the following divisional
Brislin Company has four operating divisions. During the first quarter of 2020, the company reported aggregate income from operations of $216,400 and the following divisional results.
Division | |||||||||
I | II | III | IV | ||||||
Sales | $250,000 | $199,000 | $499,000 | $443,000 | |||||
Cost of goods sold | 204,000 | 189,000 | 297,000 | 246,000 | |||||
Selling and administrative expenses | 76,600 | 54,000 | 56,000 | 52,000 | |||||
Income (loss) from operations | $ (30,600) | $ (44,000) | $146,000 | $145,000 |
Analysis reveals the following percentages of variable costs in each division.
I | II | III | IV | ||||||||||
Cost of goods sold | 71 | % | 91 | % | 81 | % | 73 | % | |||||
Selling and administrative expenses | 37 | 61 | 49 | 58 |
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 IIs unavoidable fixed costs are allocated equally to the continuing divisions.
Sales | $ | $ | $ | $ | |||||
Variable costs | |||||||||
Cost of goods sold | |||||||||
Selling and administrative | |||||||||
Total variable costs | |||||||||
Contribution margin | |||||||||
Fixed costs | |||||||||
Cost of goods sold | |||||||||
Selling and administrative | |||||||||
Total fixed costs | |||||||||
Income (loss) from operations | $ | $ | $ | $ |
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