Problem 7-5A (Part Level Submission) (a) LINK TO TEXT (b1) LINK TO TEXT (b2) LIN
ID: 2463219 • Letter: P
Question
Problem 7-5A (Part Level Submission)
(a)
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(b1)
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(b2)
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(b3)
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(c)
Problem 7-5A (Part Level Submission)
Brislin Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $205,100 and the following divisional results.Division I II III IV Sales $250,000 $198,000 $499,000 $446,000 Cost of goods sold 198,000 191,000 298,000 254,000 Selling and administrative expenses 74,900 63,000 63,000 46,000 Income (loss) from operations $ (22,900) $ (56,000) $138,000 $146,000
Analysis reveals the following percentages of variable costs in each division.
I II III IV Cost of goods sold 69 % 90 % 80 % 74 % Selling and administrative expenses 41 62 52 58
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 I Division II Contribution margin $ $
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Attempts: 1 of 5 used(b1)
Your answer is correct. Prepare an incremental analysis concerning the possible discontinuance of Division I. (Round answers to 0 decimal places, e.g. 1525. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)Continue Eliminate Net 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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Attempts: 2 of 5 used(b2)
Your answer is partially correct. Try again. Prepare an incremental analysis concerning the possible discontinuance of Division II. (Round answers to 0 decimal places, e.g. 1525. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)Continue Eliminate Net 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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Attempts: 5 of 5 used(b3)
Your answer is correct. What course of action do you recommend for each division?Division I ContinuedEliminated Division II EliminatedContinued
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Attempts: 1 of 5 used(c)
Prepare a columnar condensed income statement for Brislin Company, assuming Division II is eliminated. Division II’s unavoidable fixed costs are allocated equally to the continuing divisions. (Round answers to 0 decimal places, e.g. 1525. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)BRISLIN COMPANY CVP Income Statement For the Quarter Ended March 31, 2017 Divisions I III IV Total Sales $ $ $ $ Variable costs Cost of goods sold Selling and administrative Total variable costs Contribution margin Fixed costs Cost of goods sold Selling and administrative Total fixed costs Income (loss) from operations $ $ $ $
Explanation / Answer
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).)
Prepare an incremental analysis concerning the possible discontinuance of Division I. (Round answers to 0 decimal places, e.g. 1525. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Prepare an incremental analysis concerning the possible discontinuance of Division II. (Round answers to 0 decimal places, e.g. 1525. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
What course of action do you recommend for each division?
Eliminate Division 2
Prepare a columnar condensed income statement for Brislin Company, assuming Division II is eliminated. Division II’s unavoidable fixed costs are allocated equally to the continuing divisions. (Round answers to 0 decimal places, e.g. 1525. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)