Question
Sandhill, Inc. has three divisions: Bud, Wise, and Er. The results of operations for May, 2022 are presented below. Bud Wise Er Total Units
Sandhill, Inc. has three divisions: Bud, Wise, and Er. The results of operations for May, 2022 are presented below. Bud Wise Er Total Units sold 8,400 14,000 5,600 28,000 Revenue $196,000 $140,000 $112,000 $448,000 Less variable costs 89,600 72,800 44,800 207,200 Less direct fixed costs 39,200 53,200 33,600 126,000 Less allocated fixed costs 16,800 28,000 11,200 56,000 Net income $50,400 $(14,000) $22,400 $58,800 All of the allocated costs will continue even if a division is discontinued. Sandhill allocates indirect fixed costs based on the number of units to be sold. Since the Wise division has a net loss, Sandhill is concerned that it should be discontinued. Sandhill thinks that if the division is closed, that sales at the Bud division will increase by 12% while sales at the Er division will stay the same. Prepare an analysis showing the effect of discontinuing the Wise division. (Do not round intermediate calculations and round final answers to O decimal places, e.g. 1,525.) Revenue Less variable costs Less direct fixed costs Less allocated fixed costs Net income Bud Er Total
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