Wayne Manufacturing Company has four operating divisions. During the first quarter of 2016, the company reported...

   

 

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Wayne Manufacturing Company has four operating divisions. During the first quarter of 2016, the company reported the divisional results shown below and aggregate income shown below. Aggregate Division: North South East West Income Sales 454,410 $ 347,490 $ 276,210 $ 160,380 Cost of goods sold Selling and administrative expenses Income (loss) from operations 267,300 222,750 240,570 133,650 57,915 (22,275) $ 53,460 71,280 53,460 $ 62,370 (35,640) $ $ 133,650 $ 129,195 Analysis reveals the following percentages of variable costs in each division. Division: North South East West Cost of goods sold Selling and administrative expenses 70% 80% 75% 90% 40% 50% 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 (East and West). Consensus is that one or both of the divisions should be discontinued. Instructions- Your solutions should be clearly labeled on Solutions of this workbook. (a) Compute the contribution margin for the East and West Divisions. (See illustration 20-17 for guidance, if needed.) (b) Prepare an incremental analysis concerning the possible discontinuance of (1) East Division and (2) West Division. What course of action do you recommend for each division? Should either be closed? (See illustration 20-18 for guidance, if needed.) (c) Prepare a columnar condensed income statement for Wayne Manufacturing, assuming the division(s) that should be eliminated are eliminated. Use the CVP format. Remember: Closed division's unavoidable fixed costs are allocated equally to the continuing divisions. (See lustrations 20-16 and 20-17 for guidance, if needed.) Wayne Manufacturing Company has four operating divisions. During the first quarter of 2016, the company reported the divisional results shown below and aggregate income shown below. Aggregate Division: North South East West Income Sales 454,410 $ 347,490 $ 276,210 $ 160,380 Cost of goods sold Selling and administrative expenses Income (loss) from operations 267,300 222,750 240,570 133,650 57,915 (22,275) $ 53,460 71,280 53,460 $ 62,370 (35,640) $ $ 133,650 $ 129,195 Analysis reveals the following percentages of variable costs in each division. Division: North South East West Cost of goods sold Selling and administrative expenses 70% 80% 75% 90% 40% 50% 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 (East and West). Consensus is that one or both of the divisions should be discontinued. Instructions- Your solutions should be clearly labeled on Solutions of this workbook. (a) Compute the contribution margin for the East and West Divisions. (See illustration 20-17 for guidance, if needed.) (b) Prepare an incremental analysis concerning the possible discontinuance of (1) East Division and (2) West Division. What course of action do you recommend for each division? Should either be closed? (See illustration 20-18 for guidance, if needed.) (c) Prepare a columnar condensed income statement for Wayne Manufacturing, assuming the division(s) that should be eliminated are eliminated. Use the CVP format. Remember: Closed division's unavoidable fixed costs are allocated equally to the continuing divisions. (See lustrations 20-16 and 20-17 for guidance, if needed.)

Answer rating: 100% (QA)

Division North South East West Aggregate Income Sales 454410 347490 276210 160380 Cost of Goods sold ... View the full answer