Ribeiro Manufacturing Company has four operating divisions. During the first quarter of 2012, the company reported aggregate

Question:

Ribeiro Manufacturing Company has four operating divisions. During the first quarter of 2012, the company reported aggregate income from operations of $145,000 and the following divisional results:
Ribeiro Manufacturing Company has four operating divisions. During the first

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

Ribeiro Manufacturing Company has four operating divisions. During the first

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). Consensus is that the company should discontinue one or both of these divisions.
Instructions
(a) Calculate the contribution margin for divisions III and IV.
(b) Prepare an incremental analysis for the possible discontinuance of (1) division III and (2) division IV. What course of action do you recommend for each division?
(c) Prepare a condensed income statement in columns for Ribeiro Manufacturing, assuming division IV is eliminated.
Use the CVP format. Division IV's unavoidable fixed costs are allocated equally to the continuing divisions.
(d) Reconcile the total income from operations of ($145,000) with the total income from operations without division IV?

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
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Related Book For  book-img-for-question

Managerial Accounting Tools for Business Decision Making

ISBN: 978-1118033890

3rd Canadian edition

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly

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