Aggregate income from operations of
$213000
and the following divisional results.
Division
I
II
III
IV
Sales
$250000
$200000
$500000
$450000
Cost of goods sold
200000
192000
300000
250000
Selling and administrative expenses
75000
60000
50000
Income (loss) from operations
($25000)
($52000)
($140000)
($150000)
Analysis reveals the following percentages of variable costs in each division.
75%
90%
80%
40%
70%
50%
60%
Discontinuance of any division would save
of the fixed costs and expenses for that division.
Top management is very concerned about the unprofitable divisions (", F10," and ", G10,"). Consensus is that one or both of the divisions should be discontinued.
Instructions : (a) Compute the contribution margin for Divisions I and II.
Division I
Division II
Amount
Variable costs
Formula
Selling and administrative
Total variable expenses
Contribution margin
(b)(1) Prepare an incremental analysis concerning the possible discontinuance of Division I.
Continue
Eliminate
Net Income Increase (Decrease)
Contribution margin (above)
Fixed costs
Total fixed expenses
(b)(2) Prepare an incremental analysis concerning the possible discontinuance of Division II.
Title
Submission Guidelines: Name your worksheet SU_ACC6345_W4_MW_LastName_FirstInitial.xlsx.
Submit your completed workbook to the Midweek Assignment Submissions Area by the due date assigned.
Maximum Points
Calculated the contribution margin for Divisions I and II.
20
Evaluated the incremental analysis concerning the possible discontinuance of Division I.
10
Evaluated the incremental analysis concerning the possible discontinuance of Division II.
Wrote in a clear, concise, and organized manner; demonstrated ethical scholarship in accurate representation and attribution of sources (i.e., APA); and displayed accurate spelling, grammar, and punctuation.
Total:
50
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