Problem 7-5A a, b1-b3, c (Part Level Submission) (Video)

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
		I		II		III		IV
Sales		$246,000		$195,000		$498,000		$452,000
Cost of goods sold		198,000		192,000		304,000		247,000
Selling and administrative expenses		77,000		54,000		56,000		51,000
Income (loss) from operations		$ (29,000)		$ (51,000)		$138,000		$154,000

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

		I			II			III			IV
Cost of goods sold		73	%		92	%		77	%		79	%
Selling and administrative expenses		41			60			48			62

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).)

(b1)

	Your answer is correct.

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).)

(b2)

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

Division I Division II Contribution margin 69890 -14040 $ Continue Eliminate Net Income Increase (Decrease) Contribution margin 69890 -69890 Fixed costs Cost of goods sold -53460 -26730 26730 Selling and administrative -45430 -22715 22715 > Total fixed expenses -98890 -49445 49445 Income (loss) from operations -29000 -49445 -20445 Continue Eliminate Net Income Increase (Decrease) Contribution margin $ Fixed costs Cost of goods sold Selling and administrative Total fixed expenses Income (loss) from operations $ $ TA