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Wildhorse, Inc. has three divisions: Bud, Wise, and Er. The results of operations for May, 2022 are presented below. Bud Wise Er Total Units sold
Wildhorse, Inc. has three divisions: Bud, Wise, and Er. The results of operations for May, 2022 are presented below. Bud Wise Er Total Units sold 8,700 14,500 5,800 29,000 Revenue $203,000 $145,000 $116,000 $464,000 Less variable costs 92,800 75,400 46,400 214,600 Less direct fixed costs 40,600 55,100 34,800 130,500 Less allocated fixed costs 17,400 29,000 11,600 58,000 Net income $52,200 $(14,500) $23,200 $60,900 All of the allocated costs will continue even if a division is discontinued. Wildhorse allocates indirect fixed costs based on the number of units to be sold. Since the Wise division has a net loss, Wildhorse is concerned that it should be discontinued. Wildhorse 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. (a) 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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