Problem 12-5 Flounder 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. Division I II III IV Sales Cost of goods sold Selling and administrative expenses Income (loss) from operations $247,000 203,000 69,700 $ (25,700) $198,000 193,000 56,000 $ (51,000) $499,000 295,000 65,000 $139,000 $448,000 250,000 48,000 $150,000 Analysis reveals the following percentages of variable costs in each division. II III 71 % 88 % 81 % Cost of goods sold Selling and administrative expenses IV 76 % 60 38 59 50 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 I Division II Contribution margin 76384 -4880 SHOW SOLUTION LINK TO TEXT Your answer is partially correct. Try again. Your answer is partially correct. Try again. 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).) Continue Eliminate Net Income Increase (Decrease) Contribution margin 76384 76384 $ Fixed costs X Cost of goods sold X x Selling and administrative Total fixed expenses bbo Income (loss) from operations LINK TO TEXT Your answer is partially correct. Try again. 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 Fixed costs Cost of goods sold Your answer is partially correct. Try again. 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 Fixed costs Cost of goods sold X Selling and administrative Total fixed expenses 1000 Income (loss) from operations LINK TO TEXT x Your answer is incorrect. Try again. What course of action do you recommend for each division? Division I Division II LINK TO TEXT x Your answer is incorrect. Try again. Prepare a columnar condensed income statement for Flounder 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).) FLOUNDER COMPANY CVP Income Statement For the Quarter Ended March 31, 2017 Divisions III IV Total Sales Variable costs Cost of goods sold Selling and administrative Total variable costs Contribution margin Fixed costs Till Ill. III. III! Cost of goods sold Selling and administrative Total fixed costs Income (loss) from operations
