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Brislin Company has four operating divisions. During the first quarter of 2020, the company reported aggregate income from operations of $211,400 and the following divisional

Brislin Company has four operating divisions. During the first quarter of 2020, the company reported aggregate income from operations of $211,400 and the following divisional results.

Division
I II III IV
Sales $250,000 $199,000 $498,000 $449,000
Cost of goods sold 204,000 192,000 295,000 247,000
Selling and administrative expenses 74,600 63,000 60,000 49,000
Income (loss) from operations $ (28,600) $ (56,000) $143,000 $153,000

Analysis reveals the following percentages of variable costs in each division.

I II III IV
Cost of goods sold 72 % 88 % 80 % 76 %
Selling and administrative expenses 40 60 51 61

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.

(a)

Correct answer iconYour answer is correct.

Compute the contribution margin for Divisions I and II. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Division I Division II
Contribution margin $ $

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(b1)

Prepare an incremental analysis concerning the possible discontinuance of Division I. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Continue Eliminate Net Income Increase (Decrease)
Contribution margin $ $ $
Fixed costs
Cost of goods sold
Selling and administrative
Total fixed expenses
Income (loss) from operations $ $

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