Question
Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $205,100 and the following divisional results.
Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $205,100 and the following divisional results.
Division | |||||||||
I | II | III | IV | ||||||
Sales | $250,000 | $198,000 | $499,000 | $446,000 | |||||
Cost of goods sold | 198,000 | 191,000 | 298,000 | 254,000 | |||||
Selling and administrative expenses | 74,900 | 63,000 | 63,000 | 46,000 | |||||
Income (loss) from operations | $ (22,900) | $ (56,000) | $138,000 | $146,000 |
Analysis reveals the following percentages of variable costs in each division.
I | II | III | IV | ||||||||||
Cost of goods sold | 69 | % | 90 | % | 80 | % | 74 | % | |||||
Selling and administrative expenses | 41 | 62 | 52 | 58 |
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.
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. (Round answers to 0 decimal places, e.g. 1525. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
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