Carla Vista Company has four operating divisions. During the first quarter of 2022, 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)

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Your 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		$enter contribution margin in dollars		$enter contribution margin in dollars

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Attempts: 2 of 5 used

(b1)

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Your answer is correct.

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		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
Fixed costs
Cost of goods sold		enter a dollar amount		enter a dollar amount		enter a dollar amount
Selling and administrative		enter a dollar amount		enter a dollar amount		enter a dollar amount
Total fixed expenses		enter a total dollar amount for the previous two amounts		enter a total dollar amount for the previous two amounts		enter a total dollar amount for the previous two amounts
Income (loss) from operations		$enter income or loss from operations amouont in dollar		$enter income or loss from operations amouont in dollar		$enter income or loss from operations amouont in dollar

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Attempts: 1 of 5 used

(b2)

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Your answer is correct.

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		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
Fixed costs
Cost of goods sold		enter a dollar amount		enter a dollar amount		enter a dollar amount
Selling and administrative		enter a dollar amount		enter a dollar amount		enter a dollar amount
Total fixed expenses		enter a total dollar amount for the preious two amounts		enter a total dollar amount for the preious two amounts		enter a total dollar amount for the preious two amounts
Income (loss) from operations		$enter income or loss from operations amount in dollars		$enter income or loss from operations amount in dollars		$enter income or loss from operations amount in dollars

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Attempts: 2 of 5 used

(b3)

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Your answer is correct.

What course of action do you recommend for each division?

Division I		select a course of action ContinuedEliminated
Division II		select a course of action EliminatedContinued

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Attempts: 1 of 5 used

(c)

Prepare a columnar condensed income statement for Carla Vista 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).)