Problem 12-5 Bridgeport Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $227,500 and the following divisional results. Sales Cost of goods sold Selling and administrative expenses Income (loss) from operations $248,000 197,000 72,500 $ (21,500) Division II III $198,000 $505,000 191,000 301,000 57,000 59,000 $ (50,000) $145,000 IV $450,000 249,000 47,000 $154,000 Analysis reveals the following percentages of variable costs in each division. Cost of goods sold Selling and administrative expenses I 71 % 41 II 87 % 62 III 81 % 52 IV 77% 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. 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 78405 -3510 SHOW SOLUTION LINK TO TEXT Your answer is partially correct. Try again. Prepare an incremental analysis concerning the possible discontinuance of Division I. (Round answers to 0 decimal parentheses e.g. (45).) Continue Eliminate Net Income Increase (Decrease) Contribution margin 78405 -78405 Fixed costs Cost of goods sold 57130 42775 42775 Selling and administrative 21660 10830 10830 Total fixed expenses 46490 23245 23245 Income (loss) from operations -50000 -23245 26755 LINK TO TEXT Your answer is correct. Prepare an incremental analysis concerning the possible discontinuance of Division II. (Round answers to 0 decimal parentheses e.g. (45).) Continue Eliminate Net Income Increase (Decrease) Contribution margin 3510 Fixed costs Cost of goods sold 24830 12415 12415 Selling and administrative T. 21660 10830 10830 Total fixed expenses 46490 23245 23245 Income (loss) from operations -50000 -23245 26755 LINK TO TEXT What course of action do you recommend for each division? Division I Division II SHOW SOLUTION LINK TO TEXT Your answer is partially correct. Try again. Prepare a columnar condensed income statement for Bridgeport Company, assuming Division II is eliminated. Division II's u negative sign preceding the number e.g. -45 or parentheses e.g. (45).) BRIDGEPORT COMPANY CVP Income Statement For the Quarter Ended March 31, 2017 Divisions III IV Total Sales 1203000 Variable costs Cost of goods sold 197000 301000 249000 747000 X Selling and administrative 72500 59000 47000 178500 Total variable costs 269500 36000 296000 925500 Cidlo IPOD T- OTTO ITOR - MINI IODD boda bodo 10. Contribution margin Fixed costs Cost of goods sold Selling and administrative Total fixed costs Income (loss) from operations
