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Brislin Company has four operating divisions. During the first quarter of 2020, the company reported aggregate income from operations of $181,600 and the following divisional

Brislin Company has four operating divisions. During the first quarter of 2020, the company reported aggregate income from operations of $181,600 and the following divisional results.

Division
I II III IV
Sales $250,000 $198,000 $499,000 $443,000
Cost of goods sold 200,000 195,000 305,000 255,000
Selling and administrative expenses 70,400 63,000 65,000 55,000
Income (loss) from operations $ (20,400) $ (60,000) $129,000 $133,000

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

I II III IV
Cost of goods sold 66 % 88 % 81 % 76 %
Selling and administrative expenses 38 57 52 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.

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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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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Prepare an incremental analysis concerning the possible discontinuance of Division II. (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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What course of action do you recommend for each division?

Division I EliminatedContinued
Division II EliminatedContinued

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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. (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
I III IV Total
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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