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Ivanhoe Company has four operating divisions. During the first quarter of 2022, the company reported aggregate income from operations of $216,400 and the following
Ivanhoe Company has four operating divisions. During the first quarter of 2022, the company reported aggregate income from operations of $216,400 and the following divisional results. Division 1 IV Sales $250,000 $199,000 $499,000 $443,000 Cost of goods sold 204,000 189,000 297,000 246,000 Selling and administrative expenses 76,600 54,000 56,000 52,000 Income (loss) from operations $(30,600) $(44,000) $146,000 $145,000 Analysis reveals the following percentages of variable costs in each division. " IV Cost of goods sold 71 % 91 % 81 % 73 % Selling and administrative expenses 37 61 49 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. Prepare an incremental analysis concerning the possible discontinuance of Division II. (Enter negative amounts using either a negative sign preceding the number eg.-45 or parentheses e.g. (45)) Contribution margin Fixed costs Cost of goods sold Selling and administrative Total fixed expenses Continue Eliminate Net Income Increase (Decrease) (7450) $ $ 7450 17100 21450 38550 8550 10725 19275 8550 10725 19275 Income (loss) from operations $ (46000) $ (19275) $ 26725
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