Brislin Company has four operating divisions. During the first quarter of 2017,

Question

Brislin Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $211,600 and the following divisional results.

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

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.

1. Compute the contribution margin for Division I and II.

2. 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). tand then Division II. what course of action for each division.

Division I II III IV Sales $245,000 $197,000 $504,000 $450,000 Cost of goods sold 200,000 191,000 301,000 249,000 Selling and administrative expenses 72,400 63,000 58,000 50,000 Income (loss) from operations $ (27,400) $ (57,000) $145,000 $151,000

Explanation / Answer

1. Contribution margin for Division I and II:

2. Incremental analysis on possible discontinuance of Division I:

If Division I is discontinued, income from operations would decrease by $ 21,682. Hence Division I should not be discontinued.

Division I Division II $ $ Sales 245,000 197,000 Variable costs 174,236 210,980 Contribution margin 70,764 ( 13,980)

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