Question
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 | $ | $ |
eTextbook and Media
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 | $ | $ | $ |
eTextbook and Media
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 | $ | $ | $ |
eTextbook and Media
What course of action do you recommend for each division?
Division I | EliminatedContinued | ||
Division II | EliminatedContinued |
eTextbook and Media
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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