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		II		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.

		I			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.

(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 a dollar amount		$enter a dollar amount

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Attempts: 1 of 3 used

(b1)

• Your Answer
• Correct Answer

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Your answer is partially 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 subtotal of the two previous amounts		enter a subtotal of the two previous amounts		enter a subtotal of the two previous amounts
Income (loss) from operations		$enter the income or loss from operations in dollars		$enter the income or loss from operations in dollars		$enter the income or loss from operations in dollars

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Solution

Attempts: 3 of 3 used

(b2)

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 subtotal of the two previous amounts		enter a subtotal of the two previous amounts		enter a subtotal of the two previous amounts
Income (loss) from operations		$enter the income or loss from operations in dollars		$enter the income or loss from operations in dollars		$enter the income or loss from operations in dollars