Problem II

Brislin Company has four operating divisions. During the first quarter of 2022, the company reported aggregate income from operations of $213,000 and the following divisional results.

	Divisions
	I	II	III	IV
Sales	$ 250,000.00	$ 200,000.00	$ 500,000.00	$ 450,000.00
Cost of goods sold	200,000.00	192,000.00	300,000.00	250,000.00
Selling and administrative expenses	75,000.00	60,000.00	60,000.00	50,000.00
Income (loss) from operations	$ (25,000.00)	$ (52,000.00)	$ 140,000.00	$ 150,000.00

Analysis reveals the following percentages of variable costs in each division.

	I	II	III	IV
Cost of goods sold	70%	90%	80%	75%
Selling and administrative expenses	40%	60%	50%	60%

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.

Instructions:

1. Compute the contribution margin for Divisions I and II.
2. Prepare an incremental analysis concerning the possible discontinuance of (1) Division I and (2) Division II. What course of action do you recommend for each division?
3. Prepare a columnar condensed income statement for Brislin Company, assuming Division II eliminated. (Use the CVP format.) Division IIs unavoidable fixed costs are allocated equally to the continuing divisions.

Answer in the space given.

Compute the contribution margin for Divisions I and I c. Prepare a columnar condensed income statement for Brislin Company, assuming Division II eliminated. (Use the CVP format.) Division II's unavoidable fix costs are allocated equally to the continuing divisions