Flint Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $204,500 and the following divisional results.
| | | Division | |
| | | I | | II | | III | | IV | |
| Sales | | $253,000 | | $195,000 | | $504,000 | | $446,000 | |
| Cost of goods sold | | 199,000 | | 192,000 | | 300,000 | | 248,000 | |
| Selling and administrative expenses | | 75,500 | | 60,000 | | 64,000 | | 55,000 | |
| Income (loss) from operations | | $ (21,500) | | $ (57,000) | | $140,000 | | $143,000 | |
Analysis reveals the following percentages of variable costs in each division.
| | | I | | | II | | | III | | | IV | | |
| Cost of goods sold | | 74 | % | | 89 | % | | 78 | % | | 73 | % | |
| Selling and administrative expenses | | 38 | | | 57 | | | 52 | | | 60 | | |
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.
CALCULATOR PRINTER VERSION 4 BACK NEXT Problem 12-5 Flint Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $204,500 and the following divisional results. Division I II III IV Sales Cost of goods sold Selling and administrative expenses Income (loss) from operations $253,000 199,000 75,500 $ (21,500) $195,000 192,000 60,000 $ (57,000) $504,000 300,000 64,000 $446,000 248,000 55,000 $140,000 $ 143,000 Analysis reveals the following percentages of variable costs in each division. I II III IV 73 % 74 % 89 % 78 % Cost of goods sold Selling and administrative expenses 38 57 52 60 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. x Your answer is incorrect. Try again. 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 II Division I X 93,001.00 Contribution margin -9,440.00 CALCULATOR PRINTER VERSION 4 BACK NEXT Prepare an incremental analysis concerning the possible discontinuance of Division I. (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).) Eliminate Continue x....... 93,001.00 Net Income Increase (Decrease) ................. -93,001.00 Contribution margin 0 Fixed costs X Cost of goods sold 51740 25870 -32,505.00 X x Selling and administrative 46872 23436 -23,845.50 X Total fixed expenses 98612 49306 -56,350.50 Income (loss) from operations -21600 49306 -36650.50 $ LINK TO TEXT 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 -10080 0 10080 CALCULATOR PRINTER VERSION 4 BACK NEXT Four un WC par luy conc. Hyuyun. 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 -10080 0 10080 Fixed costs Cost of goods sold 21120 10560 -10560 Selling and administrative 25800 12900 - 12900 X Total fixed expenses 46920 23460 -23460 Income (loss) from operations -57000 -23460 33540 LINK TO TEXT Your answer is correct. What course of action do you recommend for each division? Division 1 Continued Division II Eliminated SHOW SOLUTION * CALCULATOR PRINTER VERSION BACK NEXT A Prepare a columnar condensed income statement for Flint 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).) FLINT COMPANY CVP Income Statement For the Quarter Ended March 31, 2017 Divisions I III IV Total Sales 253000 504000 446000 1203000 Variable costs M Cost of goods sold 147,260 234,000 181,040 562,300 TVIRUZZ WIZI Selling and administrative 28,728 33,280 33,000 95,008 Total variable costs 175,988 267,280 214,040 657,308 x X Contribution margin 77,012 236,720 231,960 545,692 Fixed costs Cost of goods sold 58,780 73,040 74,000 205,820 X Selling and administrative 55,472 39,320 30,600 125,392 X Total fixed costs 114,252 112,360 104,600 376,212 x Income (loss) from operations -37,240 124,360 127,360 169,480 LINK TO TEXT
