Current Attempt in Progress Blossom Forest Corporation operates two divisions, the Timber Division and the Consumer...

Transcribed Image Text:

Current Attempt in Progress Blossom Forest Corporation operates two divisions, the Timber Division and the Consumer Division. The Timber Division manufactures and sells logs to paper manufacturers. The Consumer Division operates retail lumber mills which sell a variety of products in the do-it-yourself homeowner market. The company is considering disposing of the Consumer Division since it has been consistently unprofitable for a number of years. The income statements for the two divisions for the year ended December 31, 2022 are presented below: Timber Division Consumer Division Total Sales $1,530,000 $510,000 $2,040,000 Cost of goods sold 918,000 357,000 1,275,000 Gross profit 612,000 153,000 765,000 Selling & administrative expenses 64,260 183,600 247,860 Net income $547,740 $(98,940) $448,800 In the Consumer Division, 70% of the cost of goods sold are variable costs and 35% of selling and administrative expenses are variable costs. The management of the company feels it can save $45,900 of fixed cost of goods sold and $51,000 of fixed selling expenses if it discontinues operation of the Consumer Division. Current Attempt in Progress Blossom Forest Corporation operates two divisions, the Timber Division and the Consumer Division. The Timber Division manufactures and sells logs to paper manufacturers. The Consumer Division operates retail lumber mills which sell a variety of products in the do-it-yourself homeowner market. The company is considering disposing of the Consumer Division since it has been consistently unprofitable for a number of years. The income statements for the two divisions for the year ended December 31, 2022 are presented below: Timber Division Consumer Division Total Sales $1,530,000 $510,000 $2,040,000 Cost of goods sold 918,000 357,000 1,275,000 Gross profit 612,000 153,000 765,000 Selling & administrative expenses 64,260 183,600 247,860 Net income $547,740 $(98,940) $448,800 In the Consumer Division, 70% of the cost of goods sold are variable costs and 35% of selling and administrative expenses are variable costs. The management of the company feels it can save $45,900 of fixed cost of goods sold and $51,000 of fixed selling expenses if it discontinues operation of the Consumer Division.