Problem 7-5 (Part Level Submission)

Concord Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $183,700 and the following divisional results.

		Division
		I		II		III		IV
Sales		$250,000		$198,000		$499,000		$443,000
Cost of goods sold		200,000		194,000		305,000		255,000
Selling and administrative expenses		70,300		62,000		65,000		55,000
Income (loss) from operations		$ (20,300)		$ (58,000)		$129,000		$133,000

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

		I			II			III			IV
Cost of goods sold		66	%		88	%		81	%		76	%
Selling and administrative expenses		38			57			52			60

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.

CONCORD COMPANY CVP Income Statement For the Quarter Ended March 31, 2017 DIVISIons IV Total Sales 250000 499000 443000 1192000 Variable costs Cost of goods sold 132000 247050 193800 572850 Selling and administrative 26714 33800 33000 93514 Total variable costs 158714 280850 226800 666364 Contribution margin 91286 218150 216200 525636 Fixed costs Cost of goods sold Selling and administrative Total fixed costs Income (loss) from operations