Pina Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $212,300 and the following divisional results. 1 Sales Cost of goods sold Selling and administrative expenses Income (loss) from operations $254,000 204,000 69,700 $(19,700) Division II III $199,000 $501,000 190,000 301,000 61,000 57,000 $ (52,000) $143,000 IV $443,000 247,000 55,000 $141,000 Analysis reveals the following percentages of variable costs in each division. Cost of goods sold Selling and administrative expenses I 67 % 39 II 90 % 62 III 82% 50 IV 75% 8 5 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 1 Division II Contribution margin 90137 9 820 Your answer is correct. Prepare an incremental analysis concerning the possible discontinuance of Division 1. (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) -90137 90137 Contribution margin Fixed costs Cost of goods sold 1 33660 | Selling and administrative -21258 21258 Total fixed expenses -109837 -54918 1 54918 Income (loss) from operations -19700 -54918 -35218 SHOW ANSWER Your answer is correct. Prepare an incremental analysis concerning the possible discontinuance of Division II. (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) 9820 Contribution margin -9820 Fixed costs Cost of goods sold -9500 9500 Selling and administrative -11590 11590 Total fixed expenses -21090 21090 Income (loss) from operations -21090 30910 Prepare a columnar condensed income statement for Pina 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).) PINA COMPANY CVP Income Statement Divisions Sales Variable costs Cost of goods sold Selling and administrative Total variable costs Contribution margin Fixed costs Cost of goods sold Selling and administrative Total foced costs Income (loss) from operations
