Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem 20-05A a, b1-b3, c (Video) Wildhorse Company has four operating divisions. During the first quarter of 2020, the company reported aggregate income from operations

Problem 20-05A a, b1-b3, c (Video)

Wildhorse Company has four operating divisions. During the first quarter of 2020, the company reported aggregate income from operations of $200,200 and the following divisional results.
Division
I II III IV
Sales $253,000 $198,000 $495,000 $447,000
Cost of goods sold 198,000 189,000 303,000 254,000
Selling and administrative expenses 74,800 66,000 56,000 52,000
Income (loss) from operations $ (19,800) $ (57,000) $136,000 $141,000
Analysis reveals the following percentages of variable costs in each division.
I II III IV
Cost of goods sold 68 % 90 % 79 % 75 %
Selling and administrative expenses 37 60 49 61
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.image text in transcribedimage text in transcribedimage text in transcribed
Prepare an incremental analysis concerning the possible discontinuance of Division I. (Enter negative amounts 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 Selling and administrative Total fixed expenses Income (loss) from operations $ $ Prepare an incremental analysis concerning the possible discontinuance of Division II. (Enter negative amounts 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 Selling and administrative Total fixed expenses Income (loss) from operations What course of action do you recommend for each division? Division I Division II Prepare a columnar condensed income statement for Wildhorse Company, assuming Division II is eliminated. Division II's unavoidable fixed costs are allocated equally to the continuing divisions. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) WILDHORSE COMPANY CVP Income Statement For the Quarter Ended March 31, 2020 Divisions I III IV Total 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 fixed costs Income (loss) from operations

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial and Managerial Accounting

Authors: Horngren, Harrison, Oliver

3rd Edition

978-0132497992, 132913771, 132497972, 132497999, 9780132913775, 978-0132497978

More Books

Students also viewed these Accounting questions

Question

5. Understand how cultural values influence conflict behavior.

Answered: 1 week ago