Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Wildhorse Manufacturing Company has four operating divisions. During the first quarter of 2022, the company reported aggregate. income from operations of $181,400 and the
Wildhorse Manufacturing Company has four operating divisions. During the first quarter of 2022, the company reported aggregate. income from operations of $181,400 and the following divisional results: Division " IV Sales $505,900 $406,300 $312,800 $176,000 Cost of goods sold 288,500 241,200 269,400 153,000 Selling and administrative expenses 52,200 72.900 69,200 73,200 Income (loss) from operations $165,200. $92.200 $(25,800) $(50,200) The analysis reveals the following percentages of variable costs in each division: I IV Cost of goods sold 72% 92% 74% 92% Selling and administrative expenses 41 52 65 70 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 (III and IV). The consensus is that the company should discontinue one or both of these divisions. Prepare an incremental analysis for the possible discontinuance of (1) division Ill and (2) division IV. (Round answers to O decimal places, eg. 125. Enter all negative amounts using either a negative sign preceding the number eg. -45 or parentheses eg. (45). While alternate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem.) (1) Division Ill Income Division III: Keep Div. III Shut Div. III Increase (Decrease) Contribution margin Fixed costs Totals (2) Division IV Division IV: Contribution margin Fixed costs Totals Income Increase Keep Div. IV Shut Div. IV (Decrease). What course of action do you recommend for each division? Division III should be Division IV should be Prepare a condensed income statement in columns for Wildhorse Manufacturing, assuming division IV is eliminated. Use the CVP format. Division IV's unavoidable foxed costs are allocated equally to the continuing divisions. (Enter loss using either a negative sign preceding the number eg-45 or parentheses eg. (45). While alternate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem.) WILDHORSEMANUFACTURING COMPANY eTextbook and Media Div1 CVP Income Statement Div Il Div Ill Reconcile the total income from operations of $181,400 with the total income from operations without division IV. Income from operations with Division IV Incremental income from eliminating Division IV $ Income from operations without Division IV
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started