Problem 12-5 Blue Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $194,100 and the following divisional results. Sales I $251,000 205,000 75,900 $ (29,900) Division II III $195,000 $502,000 190,000 302,000 62,000 60,000 $ (57,000) $140,000 Cost of goods sold Selling and administrative expenses Income (loss) from operations IV $446,000 251,000 54,000 $141,000 Analysis reveals the following percentages of variable costs in each division. I II III IV Cost of goods sold 68 % 90 % 79 % 73 % Selling and administrative expenses 39 57 49 6 2 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. 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 I Division II Contribution margin 81999 (11340) Your answer is correct. Prepare an incremental analysis concerning the possible discontinuance of Division I. (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) | Contribution margin 81999 -81999 | Fixed costs Cost of goods sold 65600 32800 T 32800 Selling and administrative T. 46299 23149.5 | 23149.5 TO Total fixed expenses 111899 55949.5 55949.5 Income (loss) from operations -29900 T -55949.5 -26050 Your answer is correct. 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 -(11340) Fixed costs Cost of goods sold 9000 9500 9500 Selling and administrative 26660 13330 13330 Total fixed expenses 45660 22830 22830 Income (loss) from operations -57000 -22830 34170 Your answer is partially correct. Try again. Prepare a columnar condensed income statement for Blue 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).) BLUE COMPANY CVP Income Statement For the Quarter Ended March 31, 2017 A Divisions III IV Total Sales 2510 251000 502502000 502000 502000 446000 19600 1199000 1199000 Variable costs Cost of goods sold 139400 238580 183230 561210 Selling and administrative 29601 29400 33480 92481 FF FF Total variable costs on 1 Coon craco11 1 UI) LUI Divisions III IV Total Sales 251000 502000 446000 1199000 Variable costs Cost of goods sold 139400 238580 183230 T 561210 Selling and administrative 29601 29400 33480 92481 Total variable costs 169001 267980 2 16710 653691 Contribution margin 81999 2340201 229290 545309 Fixed costs Cost of goods sold 63420 67770 196790 Selling and administrative 30600 20520 97419 Total fixed costs 111899 112140 88290 312329 Income (loss) from operations -29900 121880 141000 232980