Problem 20-05A a, b1-b3, c (Part Level Submission)

Brislin Company has four operating divisions. During the first quarter of 2020, the company reported aggregate income from operations of $212,000 and the following divisional results.

Division

IIIIIIIV

Sales$246,000$195,000$498,000$452,000

Cost of goods sold198,000192,000304,000247,000

Selling and administrative expenses77,00054,00056,00051,000

Income (loss) from operations$ (29,000)$ (51,000)$138,000$154,000

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

IIIIIIIV

Cost of goods sold73%92%77%79%

Selling and administrative expenses41604862

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 (I and II). Consensus is that one or both of the divisions should be discontinued.

(a)

Your answer is correct.

Compute the contribution margin for Divisions I and II. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Division IDivision II

Contribution margin$$

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(b1)

Prepare an incremental analysis concerning the possible discontinuance of Division I. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

ContinueEliminateNet Income Increase (Decrease)

Contribution margin$$$

Fixed costs

Cost of goods sold

Selling and administrative

Total fixed expenses

Income (loss) from operations$$$

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