Question Milwaukee, Inc, has three divisions: Bud, Wise, and Er. The results of

Question

Question Milwaukee, Inc, has three divisions: Bud, Wise, and Er. The results of May, 2016 are presented below d Wise 3,000 5,000 2,000 10,000 $70,000 $50,000 $40,000 160,000 32,000 26,000 16,000 74,000 14,000 19,000 12,000 45,000 6,000 10,000 4,000 20,000 $18,000 $(S,000) 8,000 21,000 Bud Er Total Units sold Revenue Less variable costs Less direct fixed costs locates tre Co8,000 5,000 8.000.0 Net income All of the allocated costs will continue even ??dvision is discontinued. Mlwaukee allocates direct need costs based on the number of units to be sold. Snce the w se division has net los Milwaukee feels that it should be discontinued. Minaukee feels if the division is dsed, that sales at the Bud division will increase by 12%, and that sales at the Er dvision will stay the Y (a) Prepare an analysis showing the effect of discontinuing the Wise division. Bud Er Total Revenue Less variable costs Less direct fuxed costs Less alocated fixed costs Net income Attempts: O of 1 used SAVE FOR LATER

Explanation / Answer

Req 1-a: Differential analysis 3360 2000 BUD ER TOTAL Revenue 78400 40000 118400 Less: Variable cost 35840 16000 51840 Less: Direct fixed cost 14000 12000 26000 Less: Allocated fixed cost 12537 7463 20000 Net Income 16023 4537 20560 Note: Units sold of Bud division: 3000+12% =3360 units Units sold of ER division: 2000 units Total units: 5360 units Revenue f Bud: 70000+12% = 78400 Variable cost of Bud: 32000+12% = 35840 Total Allocated fixed cost: $ 20000 Buds: 20000*3360/5360 = 12537 ER: 20000*2000/5360 =7463

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