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Carla Vista Company has four operating divisions. During the first quarter of 2022, the company reported aggregate income from operations of $204,400 and the
Carla Vista Company has four operating divisions. During the first quarter of 2022, the company reported aggregate income from operations of $204,400 and the following divisional results. Division IV Sales $253,000 $195,000 $504,000 $446,000 Cost of goods sold 199.000 192,000 300,000 248,000 Selling and administrative expenses 75,600 60,000 64,000 55,000 Income (loss) from operations $(21,600) $ (57,000) $140,000 $143,000 Analysis reveals the following percentages of variable costs in each division. I III IV Cost of goods sold 74 % 89 % 78 % 73 % 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.
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