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Crane Manufacturing Company has four operating divisions. During the first quarter of 2022, the company reported aggregate income from operations of $138,300 and the following
Crane Manufacturing Company has four operating divisions. During the first quarter of 2022, the company reported aggregate income from operations of $138,300 and the following divisional results: Division 11 III $394,500 $307,300 IV Sales $506,400 $177,300 294,400 249.400 269.200 150,600 Cost of goods sold Selling and administrative expenses Income (loss) from operations 69.400 77.500 62,000 74,700 $142.600 $67,600 $(23.900) $(48,000) The analysis reveals the following percentages of variable costs in each division: II III IV 68% 91% 75% 90% Cost of goods sold Selling and administrative expenses 41 51 65 70 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 (III and IV). The consensus is that the company should discontinue one or both of these divisions. Calculate the contribution margin for divisions III and IV. (Enter negative amounts using either a negative sign preceding the number eg.-45 or parentheses eg. (457) Divisions 111 Divisions IV Contribution margin $ Prepare an incremental analysis for the possible discontinuance of (1) division III and (2) division IV. (Round answers to decimal places, es. 125. Enter all negative amounts using either a negative sign preceding the number eg.-45 or parentheses es. (45). While alternate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem.) (1) Division III Income Increase (Decrease) Shut Div. III Division III: Keep Div. III Contribution margin Fixed costs $ $ Totals (2) Division IV Division IV: Income Increase (Decrease) Keep Div. IV Shut Div. IV Contribution margin $ $ $ Fixed costs Totals $ What course of action do you recommend for each division? Division III should be Division IV should be -15 Prepare a condensed income statement in columns for Crane Manufacturing, assuming division IV is eliminated. Use the CVP format. Division IV's unavoidable fixed costs are allocated equally to the continuing divisions. (Enter loss using either a negative sign preceding the number es.-45 or parentheses es (45). While alternate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem.) CRANEMANUFACTURING COMPANY CVP Income Statement Divi Div II Dlvill $ Reconcile the total income from operations of $138,300 with the total income from operations without division IV. Income from operations with Division IV $ Incremental income from eliminating Division IV $ I Income from operations without Division IV
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