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Cullumber Company has four operating divisions. During the first quarter of 2022, the company reported aggregate income from operations of $193,000 and the following
Cullumber Company has four operating divisions. During the first quarter of 2022, the company reported aggregate income from operations of $193,000 and the following divisional results. Division I III IV Sales $250,000 $198,000 $496,000 $443,000 Cost of goods sold 205,000 189,000 297,000 255,000 Selling and administrative expenses 70,000 63,000 61,000 54,000 Income (loss) from operations $ (25,000) $ (54,000) $138,000 $134,000 Analysis reveals the following percentages of variable costs in each division. | II III IV Cost of goods sold 69 % 89% 80 % 74 % Selling and administrative expenses 37 61 51 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.
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