Problem 7-5 (Part Level Submission) Swifty Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $215,000 and the following divisional results. I Sales Cost of goods sold Selling and administrative expenses Income (loss) from operations $249,000 199,000 76,000 $ (26,000) Division II TII $200,000 $504,000 191,000 296,000 63,000 64,000 $ (54,000) $144,000 IV $450,000 249,000 50,000 $151,000 Analysis reveals the following percentages of variable costs in each division. Cost of goods sold Selling and administrative expenses I 74 % 39 II 88 % 60 III 79 % 5 1 IV 74 % 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. *(a) 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 522100 Division II 51-5880 Contribution margin Attempts: 1 of 15 used (62) Your answer is correct. Prepare an incremental analysis concerning the possible discontinuance of Division II. (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 -5880 5880 Fixed costs Cost of goods sold 11460 11460 Selling and administrative T 12600 Total fixed expenses 48120 -54000 24060 12600 24060 -24060 T Income (loss) from operations 29940 *(c) Prepare a columnar condensed income statement for Swifty 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).) SWIFTY COMPANY CVP Income Statement Divisions 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 Attempts: 0 of 15 used Problem 7-5 (Part Level Submission) Swifty Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $215,000 and the following divisional results. I Sales Cost of goods sold Selling and administrative expenses Income (loss) from operations $249,000 199,000 76,000 $ (26,000) Division II TII $200,000 $504,000 191,000 296,000 63,000 64,000 $ (54,000) $144,000 IV $450,000 249,000 50,000 $151,000 Analysis reveals the following percentages of variable costs in each division. Cost of goods sold Selling and administrative expenses I 74 % 39 II 88 % 60 III 79 % 5 1 IV 74 % 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. *(a) 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 522100 Division II 51-5880 Contribution margin Attempts: 1 of 15 used (62) Your answer is correct. Prepare an incremental analysis concerning the possible discontinuance of Division II. (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 -5880 5880 Fixed costs Cost of goods sold 11460 11460 Selling and administrative T 12600 Total fixed expenses 48120 -54000 24060 12600 24060 -24060 T Income (loss) from operations 29940 *(c) Prepare a columnar condensed income statement for Swifty 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).) SWIFTY COMPANY CVP Income Statement Divisions 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 Attempts: 0 of 15 used