Culver 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 II III IV Sales Cost of goods sold Selling and administrative expenses Income (loss) from operations $250,000 198,000 74,900 $(22,900) $198,000 191,000 63,000 $ (56,000) $499,000 298,000 63,000 $138,000 $446,000 254,000 46,000 $146,000 Analysis reveals the following percentages of variable costs in each division. Cost of goods sold Selling and administrative expenses I 69 % 41 II 90 % 62 III 80 % 52 IV 74 % 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. 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 Contribution margin $82671 Division II (12960) Your answer is partially correct. Try again. Prepare an incremental analysis concerning the possible discontinuance of Division I. (Round answers to O decimal places, e.g. 1525. If amount decreases net income then enter the amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Continue Eliminate Net Income Increase (Decrease) Contribution margin 582671 52786) 135457) Fixed costs Cost of goods sold F61380 T(30690) ||22096) Selling and administrative 441011 30690 22096 $2786 ST(52786) Total fixed expenses 105571 (52786) Income (loss) from operations $122900) 5129886) Your answer is partially correct. Try again. Prepare an incremental analysis concerning the possible discontinuance of Division II. (Round answers to 0 decimal places, e.g. 1525. If amount decreases net Income then enter the amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Continue Eliminate Net Income Increase (Decrease) Contribution margin 5212960) (21520) (8560) Fixed costs Cost of goods sold 19100 (9550) 5550 11970 Selling and administrative 23940 (11970) BETE Total fixed expenses 43040 256000) 21520 121520) ||(21520) 34480 Income (loss) from operations Your answer is correct. What course of action do you recommend for each division? Division I Division II Continued Eliminated Your answer is partially correct. Try again. Prepare a columnar condensed income statement for Culver Company, assuming Division II is eliminated. Division II's unavoidable fixed costs are allocated equally to the continuing divisions. (If amount decreases net income then enter the amount using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45).) CULVER COMPANY CVP Income Statement For the Month Ended M Divisions Total III IV Sales $250000 $499000 $446000 $ 1195000 Variable costs Cost of goods sold 136620 238400 187960 662980 B0709 32760 266809 0149 Total variable costs 157329 271160 14640 653129 Contribution margin 1826712278402313604541871 Fixed costs Cost of goods sold 4563 2783 9 224 196570 Selling and administrative 48181 34230 3 310) 105721 Total fixed costs 112744 97013 2534 302291 Income (loss) from operations $30073) $130827 5138826 5239580
