Problem 12-5 Ayayai Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $207,400 and the following divisional results. Division III II IV $249,000 $200,000 $498,000 $446,000 Sales Cost of goods sold 192,000 305,000 205,000 248,000 Selling and administrative expenses 71,600 60,000 59,000 45,000 $ (27,600) $ (52,000) $134,000 $153,000 Income (loss) from operations Analysis reveals the following percentages of variable costs in each division. II III IV Cost of goods sold 68 % 88 % 81 % 74 % Selling and administrative expenses 40 59 47 59 Discontinuance of any division would save 50% of the fixed costs and expenses for that division. Top management is very concerned about the unprofitable divisions (I and II). Consensus is that one or both of the divisions should be discontinued. Compute the contribution margin for Divisions I and II. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Division I Division II Contribution margin Prepare an incremental analysis concerning the possible discontinuance of Division I. (Round answers to 0 decimal places, e.g. 1525. If amount decreases net income then enter the amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Increase (Decrease) Continue Eliminate Contribution margin Fixed costs Cost of goods sold Selling and administrative Total fixed expenses Income (loss) from operations 2$ 24 %24 %24 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).) Net Income Increase (Decrease) Continue Eliminate Contribution margin 2$ Fixed costs Cost of goods sold Selling and administrative Total fixed expenses Income (loss) from operations LINK TO TEXT What course of action do you recommend for each division? Division I Division II Prepare a columnar condensed income statement for Ayayai 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).) AYAYAI COMPANY CVP Income Statement Divisions Total III IV Sales 2$ Variable costs Cost of goods sold Selling and administrative Total variable costs Contribution margin Fixed costs Cost of goods sold Selling and administrative Total fixed costs Income (loss) from operations $1 $